A review of macroprudential policy in the EU in 2020.
Date: 2022-02-10
Institutions: European Systemic Risk Board
Subjects: added value, budget policy, coronavirus disease, economic activity, economic consequence, economic growth, economic recession, financial risk, financial solvency, financing, monetary policy, public finance, vaccine

A Review of 
Macroprudential Policy in 
the EU in 2020 

July 2021 

 
 
 
 
  
 
 
 
Contents 

Executive Summary 

1 

Macro-financial environment 

1.1 

Introduction 

1.2  Macroeconomic developments and outlook 

1.3 

Financial stability implications of public support measures 

Box 1  Monitoring the financial stability implications of debt moratoria, public 
guarantee schemes and other measures of a fiscal nature to protect 

the real economy 

1.4 

1.5 

1.6 

1.7 

Increasing vulnerabilities in the household and NFC sectors 

Strengthening of the sovereign-bank-corporate nexus 

Financial market developments 

Developments in residential and commercial real estate 

2 

General policies 

2.1  Operational and regulatory relief measures 

2.2 

System-wide restraints on dividend payments, share buybacks and 

other pay-outs 

Box 2  ESRB recommendation on restriction of distributions 

2.3 

The use of stress tests and scenario tools in the COVID-19 crisis 

Box 3  A system-wide scenario analysis of large-scale corporate bond 

downgrades 

3 

Risks faced by banks and policies to mitigate them 

3.1 

3.2 

3.3 

Introduction 

Risks and vulnerabilities in banks 

Policies for banks 

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4 

Risks faced by other financial intermediaries and financial markets and 

policies to mitigate them 

4.1 

4.2 

Introduction 

CCPs 

Box 4   ESRB recommendation on liquidity risks arising from margin calls 

4.3 

Insurance 

Box 5   ESRB letter to EIOPA on liquidity risks in the insurance sector 

4.4 

Investment funds 

Annex 1: Material third countries 

Annex 2: Active residential real estate instruments in Europe 

Annex 3: Active commercial real estate instruments in Europe 

Annex 4: Systemically important institutions in the EU and the United Kingdom 

Annex 5: Main features of the systemic risk buffer in the EU and UK 

Annex 6: Phasing-in of O-SII buffer and SyRB requirements 

Annex 7: Macroprudential authorities 

Countries and abbreviations 

Imprint and acknowlegements 

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Executive Summary 

The COVID-19 pandemic caused an unprecedented global health crisis and a deep economic 
recession. Swift and comprehensive support measures in the areas of monetary, fiscal and 
prudential policies helped contain the COVID-19 crisis, most notably by preserving favourable 

financing conditions, stabilising household income and providing liquidity support to the corporate 

sector. Nonetheless, economic activity contracted sharply in the second quarter of 2020. The 

economic impact of the pandemic was highly uneven on account of the pronounced dispersion of 

value-added growth across sectors of economic activity and across euro area countries. The 

easing of measures towards the end of the second quarter facilitated a strong rebound in economic 

activity in the third quarter. The decline in real gross domestic product (GDP) in 2020 amounted to 

6.9% in the euro area and 6.2% in the EU, largely driven by steep drops in private consumption on 

the back of surging forced and precautionary savings as well as investment.  

While the rollout of vaccines created an anchor for medium-term expectations, new waves 
of COVID-19 infections heavily weighed on recovery prospects. Short-term uncertainty 
remains very high on account of delays in the rollout of vaccinations and concerns about the 

effectiveness of vaccines with respect to rapidly spreading COVID-19 virus mutations. Economic 

growth is therefore expected to gain momentum only in the second half of 2021. Significant 

uncertainty also persists over the medium term, as the size of spillovers from heightened 

vulnerabilities in the non-financial corporation (NFC) and household sectors to the financial system 

and public finances as well as the scope of permanent structural changes as a result of the COVID-

19 crisis remain unclear. 

The main source of systemic risk in the EU originates from the negative impact of the 

pandemic on economic activity, rising solvency pressures in the private sector and their 
feedback effects on the financial system. To date, the swift and broad-based policy support 
measures have helped stabilise household incomes and mitigate the decline in the cash-flow of the 

corporate sector. But debt service moratoria are gradually phased out, while other government 

support programmes are likely to become more targeted and will be terminated at some point—not 

least depending on the perceived fiscal space in individual Member States. In the meantime, firms 

in several sectors continue to suffer from a substantial fall in revenues after exhausting their cash 

buffers and face difficulties in rolling over their maturing debt. 

There is scope for improving the targeting of public support measures. Improved targeting of 
public support measures could increase their efficiency by avoiding support to (i) firms that are able 

to survive without support; and (ii) unviable firms that are eventually bound to fail even with public 

support. Looking ahead, public support measures will need to shift from a defence of the pre-

pandemic status quo to more targeted solutions that help viable companies to adjust to the post-

pandemic world. Phasing out across-the-board measures is particularly warranted when these 

delay the recognition of loan losses.  

Policies could also attach higher importance to addressing the debt burden of viable but 
overindebted firms. The extraordinary public support measures adopted during the crisis were 
more effective in addressing liquidity shortfalls than in closing solvency gaps. Looking forward, 

liquidity support measures will therefore increasingly need to be complemented with solvency 

A Review of Macroprudential Policy in the EU in 2020 / July 2021 
Executive Summary 

3 

 
support measures, including through the injection of equity and quasi-equity into viable firms. 

Taking into account that small and medium-sized enterprises (SMEs) have been harder hit by the 

crisis than larger companies and that bank financing remains by far the dominant form of SME 

financing, an increase in equity through the restructuring of debt on bank balance sheets may need 

to play a key role. A complementary avenue could consist of a (partial and targeted) conversion of 

public loan guarantees into equity under the strict condition of appropriate burden-sharing 

arrangements with other debtors. However, such an approach would require enhancing the 

capacity to monitor and assess the financial situation of corporates to avoid providing debt relief to 

unviable companies. 

Furthermore, Member States should review and improve collateral enforcement procedures 
and strengthen the capacity of the judiciary to avoid bottlenecks. Reforms of foreclosure 
procedures could reduce their length, facilitate the transfer of collateral to creditors and accelerate 

the sale and valuation of collateral. Moreover, a reform of the EU’s corporate insolvency and debt 

recovery legislation could facilitate the convergence of insolvency frameworks across the EU. A 

swift adoption of the proposed EU Directive on credit servicers, credit purchasers and the recovery 

of collateral (2018/63) would be helpful in simplifying extrajudicial collateral enforcement, reducing 

the cost of non-performing loan (NPL) resolution and removing obstacles for NPL sales to 

specialised credit purchasers. In addition, preventive restructuring frameworks could support the 

balance sheet repair of companies with viable business models. Developing preventive 

restructuring frameworks in accordance with the EU Restructuring and Insolvency Directive of 2019 

ahead of the transposition deadline could help avoid lengthy and costly court procedures and 

reduce potential congestion of insolvency courts. 

To support NPL resolution, secondary markets for distressed assets should be further 
developed with urgency to facilitate banks’ efforts to move NPLs off their balance sheets. 
Moreover, Member States could assess the case for establishing asset management companies 
(AMCs). The ESRB therefore welcomed the European Commission’s communication on NPLs1 

released in December 2020. 

The negative impact of a further increase of provisions on bank capital also compounds the 

need to step up efforts to achieve higher operational efficiency, including through 
consolidation. By addressing the issue of overcapacity in retail banking and streamlining 
overlapping distribution networks, well-designed consolidation can help improve banks’ profitability 
in the face of the “lower for longer” environment2 and intensifying competition from FinTech. 

While housing markets have proven resilient to the COVID-19 crisis, house prices continued 

to perceptibly increase in 2020, thereby exacerbating vulnerabilities that prevailed prior to 
the crisis in several European countries. House prices continued to increase in 2020, further 
exacerbating the overvaluation of house prices in several EU countries that prevailed prior to the 

crisis. The greater overvaluation is accompanied by persistently high household indebtedness. 

1   Communication from the Commission to the European Parliament, the Council and the European Central Bank on 
tackling non-performing loans in the aftermath of the COVID-19 pandemic, European Commission, December 2020.  
2   The “lower for longer” environment is described in a scenario in which interest rates will remain lower for a longer time, see 
Chapter 2 of the ESRB report Lower for longer – macroprudential policy issues arising from the low interest rate 
environment, June 2021. 

A Review of Macroprudential Policy in the EU in 2020 / July 2021 
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Most countries with high household indebtedness also have a high debt service-to-income ratio, 

which adds to their vulnerability. 

Compared with the rather resilient residential real estate (RRE) market, the commercial real 
estate (CRE) market was severely impacted by the COVID-19 crisis. Transactions in the CRE 
market fell by around 50% y-o-y in the last three quarters of 2020. Office and retail property prices 

were the most severely affected, albeit with large variations across countries. The RRE sector may 

be further hit by long-term behavioural changes relating to a permanent increase in the market 

share of e-commerce. Moreover, while a sizeable share of staff will return to their offices in the 

wake of the pandemic, remote working arrangements will play a much bigger role in the future. This 

could result in a “K-shaped” recovery, with higher-quality properties that can adapt to health 

requirements being less affected. 

Risks of abrupt asset price corrections and episodes of illiquidity in financial markets have 
risen. The sharp falls in equity and bond markets at the beginning of the pandemic were 
accompanied by a wider loss in confidence, draining liquidity in corporate bond and money markets 

(“dash for cash”). Asset prices subsequently rose, with indications of a decoupling from 

fundamentals in some assets. Against the backdrop of elevated uncertainty related to the economic 

recovery path, this means that the risk of abrupt asset price falls remains high. The liquidity drain in 

March 2020 was amplified by large outflows from money market and other investment funds, 

highlighting the need for policymakers to better understand the implications for financial stability of 

a growing share of market-based financial intermediation. 

The COVID-19 shock intensified the pressure on interest rates. As pointed out above, the 
COVID-19 pandemic is a concern for financial stability through its impact on the real economy, in 

particular NFCs in certain sectors. However, it could also potentially aggravate the concerns 

stemming from the low interest rate environment in the financial sector, as it contributed to 

extending the “lower for longer” scenario. These concerns relate to (i) the profitability and resilience 

of banks, (ii) the indebtedness and viability of borrowers, (iii) systemic liquidity risk, and (iv) the 

sustainability of the business models of insurers and pension funds offering longer-term return 

guarantees. 

Banks have benefited from a variety of support measures (including the release of 
capital buffers) but are facing deteriorating asset quality. 

Assessing risks and vulnerabilities in the banking sector is subject to significant caveats in 

the current circumstances, given that the transparency of banks’ balance sheets has 
decreased. The scope of information has been reduced, delayed or subjected to temporary 
exemptions owing to the extraordinary magnitude of the shock, and the absence of accurate 

information on borrower risk may lead to uncertainty over the soundness of financial institutions.  

Banks entered the crisis in better shape than the global financial crisis, yet profitability 
challenges persist and headline CET1 ratios may paint too positive a picture. The regulatory 
and supervisory efforts since the great financial crisis have led banks to increase their capital ratios 

from their level a decade ago. However, the low market capitalisation of banks in many EU 

countries (also in comparison with the United States) may also be indicative of investor concerns 

A Review of Macroprudential Policy in the EU in 2020 / July 2021 
Executive Summary 

5 

 
about the banks’ medium-term capacity to generate profits. Such concerns may be further 

exacerbated by further declines in bank profitability from already low pre-crisis levels. While some 

specific recent cases may have partially reflected rising provisions in the second quarter of 2020, 

the deterioration in underlying asset quality implies additional pressure on profitability on account of 

rising provisioning needs going forward.  

Banks’ capital positions have been shielded by a variety of public support measures. Banks 
benefited indirectly from public support measures for households and NFCs, while public loan 

guarantees shifted a large portion of the credit risk of new lending to the government. Furthermore, 

banks also profited from temporary supervisory and regulatory adjustments, including to accounting 

rules. In addition, restrictions on the distribution of dividends also had a positive effect on banks’ 

capital positions. As a result, CET1 ratios did not decline and even increased for most banks. 

While NPLs have not yet increased, the first signs of asset deterioration have appeared. 
Normally, NPLs are a key indicator of asset quality problems at banks. But in this crisis, the large-

scale public support (including loan moratoria) has shielded banks from the immediate fallout of the 

crisis and, so far, prevented NPLs from increasing. However, the share of Stage 2 loans and 

restructured loans has started to increase as a sign of deteriorating asset quality. Furthermore, 

tightening loan standards are a further indication that banks are reassessing the quality of their loan 

portfolios. Depending on how and when public support will be phased out, an increase in NPLs is to 

be expected.  

To address the imminent challenges, banks need to recognise and provision for new NPLs 
early on and enhance their internal NPL management and resolution capacity. Recognising 
losses at an early stage will be key for banks’ balance sheet transparency. Recognising losses only 

when moratoria and guaranteed loan programmes expire would compound the risk of cliff effects, 

which could in turn trigger an abrupt deleveraging process. It will be crucial to avoid repeating the 

errors made during previous crises, when NPLs accumulated for years on the balance sheets of 

European banks and constituted a significant drag on credit expansion and concomitantly economic 

growth. Hence, banks need to be proactive in identifying and provisioning for NPLs. Furthermore, 

they need to enhance their internal NPL management and resolution capacity. 

The initial response by authorities across the EU3, including macroprudential authorities, 
was designed to avert a credit crunch and liquidity distress. In addition to the provision of 
critical functions such as payment and settlement services, an important objective of 

macroprudential policies was to ensure that banks could continue to meet the demand for credit 

throughout the economic cycle, thereby ensuring that a recession was not amplified by a credit 

crunch. Reflecting this, at the onset of the pandemic, public authorities in Europe, including 

member institutions of the ESRB, reduced capital buffers (Section 3.3) and operational burdens, for 

example by easing reporting requirements and by postponing the banking sector stress test 

(Section 2.3). 

3   Any  reference  to  the  EU  also  includes  a  reference  to  the  EEA  unless  the  context  requires  otherwise.  Any  reference  to 
“Member State(s)” includes Iceland, Liechtenstein and  Norway, unless otherwise indicated or implied  by the context. Any 
reference to the Capital Requirements Directive IV (CRD IV) or the Capital Requirements Regulation (CRR) in the context 
of  the  European  Economic  Area  (EEA)  European  Free  Trade  Association  (EFTA)  States  (i.e.  Iceland,  Liechtenstein  and 
Norway) is a reference to their national regimes. 

A Review of Macroprudential Policy in the EU in 2020 / July 2021 
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In total, 21 out of 31 countries directly released cyclical and/or structural capital buffers at 
the onset of the crisis. Generally speaking, countries freed up capital by releasing cyclical buffers 
or, if these were not in place, structural buffers with the aim of reducing the risk of procyclical 

behaviour. These buffers were released early on in the crisis in March and April 2020. 

• 

• 

• 

• 

Release of cyclical capital buffers: 13 out of 14 countries that had a positive countercyclical 

buffer (CCyB) rate or were set to implement one in the course of 2020 released it fully (nine 

countries) or partially (four countries). Given this limited number of countries and the partially 
low CCyB rates in place, this amounted to an overall capital release of around €19 billion4, 

representing 0.22% of risk-weighted assets (RWA).  

Reduction or postponement of the phasing-in schedule of structural capital buffers: two 

countries released structural buffers in addition to their CCyBs. Eight countries without a 

CCyB reduced or postponed the phasing-in of other systemically important institution (O-SII) 

buffers (three), the systemic risk buffer (SyRB) (two) or both (three).  

No release/reduction of capital buffers: for various reasons, ten countries did not release any 

capital buffers. 

These responses complemented the additional flexibility provided with respect to 

microprudential capital and liquidity buffers and measures to limit voluntary pay-outs and 

preserve banks’ capital position as well as operational and regulatory relief measures. 

The heterogeneity in the approaches taken reflects the different extent to which 

macroprudential buffers had been built up and policy considerations varied in an 

environment of heightened uncertainty, but also points to the need to rethink the 
macroprudential buffer framework. As regards the timing of release, countries that released 
capital buffers sought to support lending and provisioning efforts of banks at the onset of the crisis. 

Given the absence of prior experience with releases, some countries wanted to send a signal to 

banks that CCyBs were indeed released by authorities in the face of a negative shock and 

therefore released them fully or partially. Another aspect was to use the release to gain experience 

with the effect of releases on bank behaviour. At the other end of the spectrum were countries that 

only wanted to release capital buffers once losses started to materialise on a large scale or that 

refrained from a release in the light of the risks still building up in residential real estate. The 

release of structural buffers in response to a negative shock had not been foreseen by EU 

legislation, which likewise did not contain provisions for handling a shock due to a pandemic. 

Discretionary adjustments of structural buffers – for which there is no clear regulatory rationale for 

lowering in a crisis like the present one when structural risks persist – risk undermining the efficacy, 

predictability and credibility of the prudential framework in the longer term. The response of 

macroprudential authorities to the crisis may therefore be seen to warrant some rethinking of the 

macroprudential buffer framework (see next paragraph). 

To ensure sufficient credit supply throughout the crisis, banks’ capital buffers need to be 

usable for banks to continue financing the economy and absorb losses, and 

macroprudential authorities have started discussing the lessons to be drawn from the 
impact of the COVID-19 crisis on the buffer framework. There is a concern that banks may start 

4   Figure provided by the EBA for banks at the highest level of consolidation in the EU (circa 130 in the EBA sample). 

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to behave procyclically if they are not able or willing to use their buffers. In practice, banks may 

have many reasons not to use their buffers, including fears of further credit losses, uncertainty 

about the timing or speed of buffer replenishment in the future, and fear of stigma from financial 

markets or rating agencies, leading to higher funding costs or possible restrictions on dividend 

distributions or other voluntary pay-outs. Banks may also be unable to use their capital buffers or 

discretionary management buffers because of overlapping requirements, for example with respect 

to binding leverage ratio or minimum requirements for own funds and eligible liabilities. With this in 

mind, and also because of the ongoing uncertainty over how the COVID-19 crisis will affect banks’ 

balance sheets, macroprudential authorities have started discussing solutions to removing potential 

disincentives for buffer use. They also contemplated more medium-term changes to the regulatory 

framework, which is timely in view of the forthcoming review of the macroprudential framework by 

the European Commission in 2022. 

The crisis manifested itself first in the financial markets, with knock-on effects on 
non-bank financial entities, pointing to the need to develop a macroprudential 
framework beyond the banking sector. 

The “dash for cash” at the onset of the COVID-19 pandemic highlighted the 
interconnectedness across, and vulnerabilities in, the non-bank financial system. The 
outbreak of the COVID-19 pandemic led to an increase in investor risk aversion, which triggered a 

broad-based repricing of risk. This, together with the need to make payments, led to an increased 

demand for safe and liquid assets, notably cash. The “dash for cash” was accentuated by the 

margin calls on derivatives transactions, which had ramifications for other markets. For example, 

redemptions by insurers and institutions for occupational retirement provision (IORPs) from money 

market funds (MMFs) correlated with the incidence of margin calls on their derivative exposures. 

The combination of investor redemptions and deteriorating market liquidity of the assets held by 

investment funds created liquidity management challenges for some types of MMFs and corporate 

bond funds. With some of these developments reinforcing each other, there was a risk that 

impaired market functioning would adversely affect the ability of financial and non-financial firms to 

raise funds. This would ultimately have further weakened the economy. 

The fact that central banks had to intervene to restore market functioning highlights the 
need to strengthen the macroprudential framework for non-bank financial intermediaries. 
Central banks introduced or expanded extraordinary asset purchase programmes, special liquidity 

operations and US dollar funding facilities to restore market functioning and maintain the efficient 

transmission of monetary policy measures. These interventions were effective, but expectations of 

public intervention can create moral hazard and make the build-up of vulnerabilities more likely. 

Strengthening the macroprudential framework is particularly important as the capital markets union 

(CMU) foresees that the non-bank financial sector will in future play a greater role in the provision 

of credit to the real economy.  

In the absence of a macroprudential framework beyond the banking sector, measures by 

public authorities tended to be microprudential in nature and/or focused on the use of 
microprudential tools. These measures included actions by security market regulators to improve 
market functioning, for example by implementing short-selling bans and/or lowering the reporting 

threshold for short sales. In-built measures of the insurance framework (volatility adjustment, long-

A Review of Macroprudential Policy in the EU in 2020 / July 2021 
Executive Summary 

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term guarantees (LTGs) and transitionary measures) mitigated the balance sheet impact of asset 

price falls and lower risk-free rates on the insurance sector. The ESRB also discussed and 

recommended medium to longer-term measures to mitigate risk and improve the response to future 

crises. 

A Review of Macroprudential Policy in the EU in 2020 / July 2021 
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1 

Macro-financial environment 

1.1 

Introduction 

The COVID-19 pandemic caused an unprecedented global health crisis and a deep economic 
recession. The swift and forceful policy response at the national and EU level cushioned the 
economic and social impact of the crisis. Nonetheless, countries that were more affected by the 

pandemic and associated containment measures faced the steepest decline in GDP. While the 

economic rebound in the third quarter was stronger than expected and the prospects for the rollout 

of vaccines are encouraging, further waves of COVID-19 infections and concomitant containment 

measures are holding back the economic recovery. Uncertainty remains high, mainly on account of 

different epidemiological scenarios, in particular the spreading of mutated variants of the COVID-19 

virus, delays in the rollout of vaccinations, in part due to newly discovered side-effects, and the 

scope of permanent structural changes as a result of the crisis.  

The main source of systemic risk in the EU originates from the negative impact of the 

pandemic on economic activity, which may give rise to widespread defaults in the private 
sector and have feedback effects on the financial system. To date, the swift and broad-based 
policy support measures have helped stabilise household incomes and mitigate the decline in the 

cash-flow of the corporate sector. But government support programmes become more targeted and 

are being phased out. 

The success of the efforts to contain solvency pressures in the non-financial corporate 
sector will also determine the magnitude of the spillover effects to the financial sector. While 
banks entered the pandemic crisis in much better shape than at the start of the previous crisis, they 

are facing a combination of rising asset quality concerns, ongoing pressures on profitability, 

persistent structural problems and, in some jurisdictions, still high legacy NPLs. While NPL ratios 

have not yet risen, the shares of IFRS 9 Stage 2 loans and restructured loans in total loans 

(forward-looking indicators of future credit risk materialisation) have started to increase, particularly 

for loans under moratoria and other public support schemes. Deteriorating asset quality and 

increasing provisioning needs could have a pronounced impact on the capital position of banks, 

which are already suffering from structural weaknesses such as low profitability. Most notably, the 

pronounced dispersion of provisioning practices across European banks could point to under-

provisioning in some segments of the banking sector. 

To address the imminent challenges, banks need to be proactive in identifying and 
provisioning for NPLs. Recognising losses at an early stage will be key to keeping bank balance 
sheets transparent. Recognising losses only when moratoria and guaranteed loan programmes 

expire would compound the risk of cliff effects, which could in turn trigger an abrupt deleveraging 

process. It will be crucial to avoid repeating the errors made during previous crises, when NPLs 

accumulated for years on the balance sheets of European banks and constituted a significant drag 

on credit expansion and concomitantly economic growth. 

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Macro-financial environment 

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Efforts to prepare for a rise in NPLs also need to encompass measures outside the micro- 
and macroprudential domains. In particular, there is a need to reform insolvency and foreclosure 
frameworks and strengthen the capacity of the judiciary to avoid bottlenecks. Moreover, having 

deep and efficient secondary markets for NPLs would help accelerate the resolution process 

through sales of NPLs. The ESRB General Board therefore welcomed the European Commission’s 
communication on NPLs released in December 2020.5 

The market turmoil at the onset of the pandemic highlighted the interconnectedness across, 
and vulnerabilities in, market-based finance and parts of the non-bank financial system. The 
outbreak of the COVID-19 pandemic led to an increase in investor risk aversion, which triggered a 

broad-based repricing of risk and an increased demand for safe and liquid assets, notably cash 

(Section 4.1). It created an imbalance in demand and supply with, for example, some segments of 

financial and non-financial corporate debt markets temporarily facing severe liquidity stress. This 

was compounded by margin calls on derivative transactions, which had ramifications for other 

markets. The combination of investor redemptions and deteriorating market liquidity of the assets 

held by investment funds created liquidity management challenges for some types of money market 

funds and corporate bond funds. While financial markets largely recovered from the shock, some 

decoupling of asset prices from fundamentals occurred in some financial market segments, 

implying that the risk of potentially abrupt price corrections remains high in an environment of 

elevated uncertainty related to the economic recovery path.  

1.2 

Macroeconomic developments and outlook 

The COVID-19 pandemic led to an unprecedented contraction in global economic activity. 
The January 2021 World Economic Outlook (WEO) estimated that the global economy contracted 

by 3.5% in 2020. Swift and comprehensive support measures in the areas of monetary, fiscal and 

prudential policies helped contain the COVID-19 crisis, most notably by preserving favourable 

financing conditions, stabilising household income and providing liquidity support to the corporate 

sector (Section 1.4). However, despite the forceful policy action, economic activity fell sharply in all 

EU countries in the second quarter of 2020 (-11.4% q-o-q), with variations across countries partly 

linked to the severity of the pandemic and associated containment measures (Chart 1.2.A). The 

COVID-19 related shock also tended to be more pronounced in EU countries with lower pre-crisis 

GDP per capita levels (Chart 1.2.B). On the back of extensive fiscal support measures, the public 
debt-to-GDP ratio in the EU rose from 79.2% at end-2019 to 92.4% at end-20206. This increase 

was heterogeneous across EU Member States, primarily depending on the severity of the GDP 

shock and the mix of public support measures (Section 1.3). 

5   Communication from the Commission to the European Parliament, the Council and the European Central Bank on 
tackling non-performing loans in the aftermath of the COVID-19 pandemic, European Commission, December 2020. 

6   European Commission 2021 Spring Forecast, May 2021. 

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Macro-financial environment 

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Chart 1.2.A 

Real GDP growth in the EU 

The COVID-19 crisis was more severe than previous crises, with pronounced cross-country 

differentiation 

(percentage change in real GDP, seasonally and working-day adjusted) 

COVID-19 crisis (Q4 2019 - Q2 2020)
Global financial/sovereign debt crisis (peak-to-trough)

Global financial crisis (Q3 2008 - Q3 2009)
Year-on-year growth 2020

0

-5

-10

-15

-20

-25

-30

ES MT FR IT PT HR HU BE GR AT SI CY RO DE CZ NL BG PL

LV LU DK SE IE EE LT

FI

Sources: Eurostat and ESRB Secretariat calculations. 
Note: The yellow dots compare the maximum GDP level over the period Q1 2007 – Q4 2008 with the minimum GDP level over 
the period Q1 2008 – Q4 2014. 

Chart 1.2.B 

Real GDP per capita evolution in the EU 

The COVID-19 crisis tended to be more pronounced in EU countries with lower pre-crisis GDP per 

capita levels 

(x-axis: real GDP per capita level in 2019, in percent of EU average; y-axis: post-crisis revisions to projected GDP growth in 
2020, percentage points) 

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-2

-4

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-10

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BG

SE

LT

FI

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R² = 0.2148

DE

NL

LU

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EE

RO

LV

CZ

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PT

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0%

50%

100%

150%

200%

250%

300%

350%

Real GDP per capita in 2019

Sources: Eurostat and ESRB Secretariat calculations. 
Notes: The revision to real GDP per capita growth is the difference between the projection for 2020 in the European 
Commission Autumn 2019 Forecast and the Autumn 2020 Forecast. EU average refers to the average of the EU27 Member 
States. The black line indicates the trend line, with R2 = 0.215. 

A Review of Macroprudential Policy in the EU in 2020 / July 2021 
Macro-financial environment 

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The rebound of economic activity in the EU in the third quarter was stronger than expected, 

but new waves of COVID-19 infections and the concomitant rise in containment measures 
increased economic uncertainty and weighed on short-term growth prospects. The renewed 
rise in containment measures led to a decline in euro area GDP of 0.7% q-o-q in the fourth quarter 

of 2020 and 0.6% q-o-q in the first quarter of 2021. While activity in the manufacturing sector 

continued to hold up relatively well, new restrictions on social interaction had a pronounced impact 

on significant parts of the service sector. Although fiscal policy measures are supporting 

households and firms, consumers remain cautious on account of concerns about the impact of the 

pandemic on employment and incomes. Moreover, weaker balance sheets and an uncertain 

economic outlook are weighing on business investment. At the same time, inflation remained very 

low in 2020 in the context of weak demand and significant slack in labour and product markets. 

While the start of vaccinations has perceptibly reduced the probability of more severe 

scenarios, new waves of COVID-19 infections have raised uncertainty regarding the timing 
and strength of the recovery in 2021. The recovery is expected to gain momentum only in the 
second half of 2021 in line with the rollout of vaccinations and the decline in the stringency of social 

distancing measures, with real GDP in the EU expected to increase by 4.2% in 2021 and 4.4% in 

2022. While the GDP level of Q4 2019 is now expected to be reached in Q4 2021 in the EU – about 

a year earlier than projected in the autumn 2020 forecast – some Member States (most notably 

Italy and Portugal) are only forecast to return to their pre-crisis GDP levels towards the end of 2022. 

Significant downside risks prevail in respect to the emergence of further mutations of the COVID-19 

virus and the effectiveness of vaccines in respect to these mutations. Moreover, rising 

vulnerabilities in the NFC sector and their possible spillover to the financial system constitute a 

major downside risk for the medium-term economic outlook. To bridge the gap until the uncertainty 

recedes and the economic recovery is firmly entrenched, policies to support favourable financing 

conditions and an expansionary fiscal stance remain essential. 

The COVID-19 crisis can be expected to cause or accelerate permanent structural changes 
in the EU economy. These include changes to living and working habits and associated changes 
in consumption and investment patterns, with pronounced positive or negative effects for the cash 

flow and profitability of individual sectors. They may also include a deepening of existing economic 

divergences between Member States on account of the different country-specific composition of 

value added (Chart 1.2.C). Looking ahead, while we know that the “new normal” will be different 

from the status quo of the pre-crisis era, the extent and precise direction of the ongoing permanent 

structural changes are still uncertain. While some heavily affected sectors—such as tourism—are 

likely to recover at some point, other sectors may suffer from permanent losses (e.g., companies 

are likely to avail themselves of digital meetings to replace a sizeable part of business travel, while 

the demand for commercial real estate and especially lower-quality office buildings is likely to 

permanently decline due to the more widespread use of teleworking). At the same time, at least a 

part of the beneficial impact of lockdowns on digital businesses is likely to persist. The crisis may 

also influence the structure and scope of value chains. These structural changes may also have an 

impact on financial stability, as sectors that are temporarily but severely affected and those 

suffering from permanent scarring can be expected to face rising solvency pressures and possibly 

a sizeable wave of corporate insolvencies. This could be exacerbated through cliff effects caused 

by a premature withdrawal of public support measures—notably in countries where concerns about 

limited fiscal space and high sovereign debt may constrain further fiscal support (Chart 1.2.D). 

A Review of Macroprudential Policy in the EU in 2020 / July 2021 
Macro-financial environment 

13 

 
Rising NFC sector vulnerabilities may also trigger asset price corrections, which could in turn affect 

the banking system. Moreover, the surge in public debt-to-GDP ratios may over time reduce the 

fiscal space for continued policy support—most notably in countries that entered the COVID-19 

crisis with already high levels of public debt (Section 1.3). 

Chart 1.2.C 

Evolution of gross value added per economic (NACE) sector 

The impact of COVID-19 in the EU differed significantly across sectors 

(q-o-q evolution of gross value added per economic sector, EU level, percentage) 

Total all NACE activities
Agriculture, forestry and fishing
Industry (except construction)
Manufacturing
Construction
Wholesale and retail trade, transport, accommodation and food service activities
Information and communication
Financial and insurance activities; real estate activities
Professional, scientific and technical activities; administrative and support service activities
Public administration, defence, education, human health and social work activities
Arts, entertainment and recreation; other service activities; activities of household and extra-territorial organizations and bodies

30%

20%

10%

0%

-10%

-20%

-30%

Q1 2020

Q2 2020

Q3 2020

Q4 2020

Sources: Eurostat and ESRB Secretariat calculations. 
Note: The NACE sectors “Financial and insurance activities” and “Real estate activities” have been merged for better readability 
of the chart. 

A Review of Macroprudential Policy in the EU in 2020 / July 2021 
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14 

 
 
Chart 1.2.D 

Distance to medium-term objective (MTO), general government net lending and public debt 

Pre-crisis fiscal space was a determinant of the size of fiscal expansion in 2020 

(x-axis: pp distance to MTO; y-axis: pp difference between 2019 and 2020 lending/borrowing) 

i

f
o
)
-
(
g
n
w
o
r
r
o
b
t
e
n
r
o
)
+
(
g
n
d
n
e
l

i

t
e
n
n

i

e
g
n
a
h
C

t
n
e
m
n
r
e
v
o
g

l
a
r
e
n
e
g
e
h
t

-3

-4

-5

-6

-7

-8

-9

-10

-11

-12

RO

HU

FR

BE

IT

ES

EE

LV
FI

PT

SK

PL

SI

MT

IE

CZ

CY

HR

LT

AT

SE

DE

NL

BG

LU

DK

GR

-5

-4

-3

-2

-1

0

1

2

3

4

5

Distance to MTO in 2019

Sources: Eurostat, European Commission (AMECO) and ESRB Secretariat calculations. 
Notes: The difference between the net lending (+) or net borrowing (-) by general governments is calculated as the difference 
between the net lending/borrowing in 2019 and the forecast net lending/borrowing in 2020 according to the spring 2021 forecast 
by the European Commission. Distance to MTO is calculated as the difference between the structural budget balance in 2019 
and the MTO, as defined by the European Commission. The size of the bubbles indicates the public debt-to-GDP ratio. 

1.3 
measures 

Financial stability implications of public support 

To mitigate the impact of the COVID-19 pandemic on the real economy, Member States 

implemented swift and unprecedented public support measures, with beneficial effects for 
financial stability.7 The measures took the form of debt service moratoria, public loan guarantees, 
public loans, transfers, subsidies, tax deferrals, tax relief, public support for trade credit insurance 
and equity participation.8 In many countries, private loan moratoria were also announced by the 

financial industry. 

In June 2020, the ESRB issued Recommendation ESRB/2020/8 to gather comprehensive 

information on these support measures; in February 2021, it published a report on their 

7   The European Union’s state aid temporary framework to support the economy in the context of the COVID-19 pandemic 

provided governments with the necessary flexibility to adjust their fiscal support to the crisis circumstances. The European 
Commission adopted the temporary framework to enable Member States to use the full flexibility foreseen under state aid 
rules to support their economy after the COVID-19 outbreak, which was first introduced in March and twice amended in 
April and May 2020. From direct grants to public loans and state guarantees for loans, the temporary framework allows for 
these types of aid, which can be granted by Member States. A full list of state aid measures which have been adopted 
under Articles 107(2)b, 107(3)b and 107(3)c TFEU and under the temporary framework can be found on the European 
Commission website: Coronavirus Outbreak - List of Member State Measures approved under Articles 107(2)b, 
107(3)b and 107(3)c TFEU and under the State Aid Temporary Framework. 

8   Note that drawing upon the terminology used by Recommendation ESRB/2020/8, “direct grants” refer to subsidies to both 
households as well as enterprises. Furthermore, while the widespread labour market policies Member States have applied 
during the pandemic are subsumed under grants, they were not a focus topic of the ESRB’s work and will be covered in a 
separate paragraph of this section. 

A Review of Macroprudential Policy in the EU in 2020 / July 2021 
Macro-financial environment 

15 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
financial stability implications (Box 1).9 While these measures were primarily targeted at the real 
economy, they have so far prevented the COVID-19 crisis from morphing into a crisis of the 

financial system. The effectiveness of the public support measures in preserving financial stability 

depends on their size and design features. 

The most common measures used by Member States were public loan guarantees (used by 
all Member States10, albeit to different degrees), direct grants (used by 29), tax deferrals (28) 
and loan moratoria (25). As of December 2020, the reported uptake of the fiscal programmes 
(excluding moratoria) was above €800 billion (6% of EU GDP), with €461 billion corresponding to 

publicly guaranteed loans (Table 1.3.A). In addition, around €474 billion of loans (3% of the 
outstanding stock of bank loans)11 were subject to moratoria. However, compared with the 

announced size of the public guarantee programmes, the uptake was rather modest in many 

countries (33%). This may reflect administrative bottlenecks as well as a possible reluctance of 
fragile or already highly indebted companies to assume more debt.12 

9   See Financial stability implications of support measures to protect the real economy from the COVID-19 pandemic, 
ESRB, February 2021. On the same topic for the euro area, see “Financial stability considerations arising from the 
interaction of coronavirus-related policy measures”, Financial Stability Review, ECB, November 2020, Special Feature 
A. 

10   By 2020, the ESRB had 31 Member States, before the United Kingdom left on 31 January 2021. 

11   The total loans considered refer to September 2020 data from ECB CBD and BSI databases. Methodological differences 

exist compared with the numbers published by the EBA with reference date June 2020 (which refer to direct reporting data 
from banks). 

12   Other explanatory factors might include: very strict eligibility criteria, low loan demand due to high uncertainty, deliberately 

ambitious announced sizes of the programmes, or a relative advantage of other forms of public support. 

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Table 1.3.A 

Announced size and uptake of moratoria and fiscal programmes (December 2020) 

The total announced size of moratoria and fiscal measures across the EU is substantial, whereas 

the uptake as of December 2020 was still relatively limited 

2020Q4 

(EUR billion) 

(percentage of 2019 GDP) 

Uptake 

Announced size 

Uptake 

Announced size 

Moratoria 

Public guarantees 

Public loans 

Direct grants 

Tax deferrals 

Tax relief 

Public support for credit insurance 

Total fiscal measures 

474 

461 

79 

136 

106 

34 

4 

820 

1,531 

202 

315 

167 

75 

216 

2,507 

Total support (incl. loan moratoria) 

1,294 

3.3% 

3.2% 

0.6% 

0.9% 

0.7% 

0.2% 

0.0% 

5.7% 

9.0% 

10.7% 

1.4% 

2.2% 

1.2% 

0.5% 

1.5% 

17.5% 

Sources: Recommendation ESRB/2020/8 (reference date 31 December 2020), ECB (MNA, BSI, CBD). 
Notes: Announced size refers to field 1.1.01 and uptake to field 2.2.10 for all measures apart from tax relief and tax deferrals 
(where fields 2.12.10 or 2.13.10 were used if the latter was not available), and public support for credit insurance (where field 
2.14.10 was used). Reporting data gaps exist – results should be interpreted with caution in particular for the uptake of direct 
grants, tax measures and credit insurance guarantees, where reporting was not mandatory. 

The significant cross-country heterogeneity – in terms of the size, uptake and design of 
public support measures – primarily reflects differences in vulnerabilities and fiscal space. 
Chart 1.3.A illustrates the heterogeneity in scale and scope of public support measures across 

countries. The specific policy mix differs across countries. While most countries implemented 

extensive public loan guarantee programmes, others also announced large-scale envelopes of 

direct grants and tax deferrals. The heterogeneity is reflected in the balance of liquidity versus 

solvency measures, in the gap between the overall envelopes and the uptake of measures, but also 

in the size of the uptake itself, which is most evident in the case of moratoria (Figure 1.3.A).  

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Chart 1.3.A 

Announced size of fiscal programmes 

The policy mix chosen differed significantly across countries, but many of them implemented large-

scale public guarantee schemes 

(percentage of 2019 GDP) 

Public guarantee programmes
Public loans programmes
Direct grants programmes
Tax deferral programmes

Tax relief programmes
Public support for trade credit insurance programmes
Average announced size of programmes
Percentage change in GDP (right-hand scale reversed)

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

4%

2%

0%

-2%

-4%

-6%

-8%

-10%

-12%

AT BE BG CY CZ DE DK EE ES FI FR GR HR HU IE IS IT LI LT LU LV MT NL NO PL PT RO SE SI SK

Sources: Recommendation ESRB/2020/8 (reference date 31 December 2020), ECB (MNA). 
Notes: GDP at current prices. Moratoria programmes are not included as they usually do not have a predefined envelope size. 
Reporting data gaps exist – results should be interpreted with caution. 2020 GDP for LI is not available, and therefore the 
percentage change in GDP is not represented in the chart. 

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18 

 
 
 
 
Figure 1.3.A 

Heterogeneity in the uptake of moratoria and fiscal measures by 31 December 2020 

The heterogeneity across countries is also reflected in the uptake of measures, most evidently for 

moratoria. 

(percentages) 

25

20

15

10

5

0

Public loans/ guarantees

Direct grants

Tax measures

Loan moratoria

Sources: Recommendation ESRB/2020/8 (reference date 31 December 2020), ECB (MNA). 
Notes: Total uptake refers to (i) field 2.2.10 of Template 2 for public guarantees, public loans and direct grants, (ii) field 2.12.10 
or 2.13.10 for tax relief and tax deferrals. For moratoria uptake, amount outstanding (field 2.5.10) was considered when 
available, and in other cases volume accepted (field 2.2.10) was considered for non-expired measures. There are gaps in the 
data reported and the results should be interpreted with caution, especially for the uptake of direct grants and tax measures, 
where reporting was not mandatory. The box plot shows the median, 25th and 75th percentile (grey box) as well as the maxima 
and minima across countries for selected programmes. In the box plot of moratoria, CY was excluded given that the uptake was 
an extreme outlier. 

In the course of the crisis, liquidity support measures were gradually complemented with 
solvency support. At the beginning of the crisis, public support measures predominantly focused 
on easing liquidity constraints. The swift implementation of public guarantees to loans, public loans 

and tax deferrals, but also of loan moratoria programmes, enabled NFCs to mitigate the abrupt fall 

in cash flows by transferring a part of their current liabilities to the future. The provision of new 

lending to the NFC sector was strongly supported by fiscal measures, with about one-third of the 

new loan commitments provided by banks to NFCs in the euro area benefiting from either public 
guarantees or public loans.13 Households benefited from short-time work arrangements as well as 
loan moratoria and tax deferrals, which allowed them to cope with declining income. The longer the 

crisis lasts, however, the clearer the limits of liquidity support become, as vulnerable companies, 

including those with high pre-crisis indebtedness, are increasingly unable to assume more debt and 

liquidity stress gradually morphs into solvency problems. Against this background, governments 

have started to gradually complement liquidity support with solvency support in the form of 

subsidies, tax relief and equity participations, even if in many cases the latter only target very large 

companies (see Table 1.3.A). 

During the COVID-19 pandemic, EEA countries also applied labour market policies to 
sustain household incomes and protect employment. At the onset of the crisis, priority was 

13   The new commitments of NFCs as reported by AnaCredit between March and September 2020. 

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19 

 
 
 
given to immediate relief and containment measures, i.e. compensating for income loss owing to 

redundancies and reduced working hours. In addition, countries used wage and hiring subsidies as 

well as targeted active labour market measures such as retraining. To reduce wage costs while 

mitigating a decline in labour income, many countries implemented or revised short-time work or 

temporary layoff schemes. Thus, a substantial share of employees was on short-time work or 

temporary layoff during the height of the first wave of COVID-19 infections. Estimates in five of the 

largest euro area countries range from 10 million in Germany (24% of employees) to around 12 
million in France (47% of employees).14 There is evidence that short-time work arrangements 

indeed reduced employment losses in Europe. Thanks to short-time work benefits, the drop in euro 

area households’ net labour income from reduced working hours during the lockdowns amounted to 
7%, as opposed to an estimated decline of 22% in the absence of such arrangements.15 

Looking ahead, it will be essential to continue fiscal support measures to bridge the gap 
until the recovery is firmly entrenched on the back of the rollout of vaccinations. By 
generating cliff effects, a premature withdrawal of fiscal support measures could cause significant 

damage to the economic recovery prospects. That being said, governments may wish to reassess 

the efficiency and effectiveness of different forms of policy support with a view to improving the 

focus of support measures. This will be particularly important in countries for which the increase in 

public debt, including on account of explicit and implicit contingent liabilities, may be perceived as 

limiting fiscal space. In a similar vein, the rise in NFC sector vulnerabilities will increase the need to 

complement liquidity with solvency support measures for viable but overindebted companies. A 

comprehensive approach to addressing NFC sector vulnerabilities will also be key to containing 

spillover effects to the banking system. 

Box 1   
Monitoring the financial stability implications of debt moratoria, public 
guarantee schemes and other measures of a fiscal nature to protect the 
real economy 

A close dialogue between macroprudential and fiscal authorities is necessary to ensure a 

timely and effective assessment of the financial stability implications of moratoria and fiscal 
measures to protect the real economy in response to the COVID-19 pandemic. National and 
EU authorities swiftly took decisive measures to support the liquidity and solvency of firms and 

protect households’ income during the COVID-19 pandemic. While these measures primarily 

targeted the non-financial sector, they also had implications for financial stability. Hence, on 14 May 

2020, the ESRB sent a letter to EEA governments to encourage fiscal authorities to engage in an 

intensified dialogue with national macroprudential and supervisory authorities for the purpose of 

14   The remaining estimates are: 8.5 million in Italy (44% of employees), 3.9 million in Spain (23% of employees) and 1.7 
million in the Netherlands (21% of employees). See “Short-time work schemes and their effects on wages and 
disposable income”, Economic Bulletin, Issue 4, ECB, 2020. For Spain there is an alternative estimate for employees 
under such schemes: 3 million wage earners (21.9% of total); see Izquierdo, M., Puente, S. and Regil, A., “Furlough 
schemes in the COVID-19 crisis: an initial analysis of furloughed employees resuming work”, Economic Bulletin, Issue 2, 
Banco de España, 2021. 

15 

“Short-time work schemes and their effects on wages and disposable income”, Economic Bulletin, Issue 4, ECB, 
2020. 

A Review of Macroprudential Policy in the EU in 2020 / July 2021 
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20 

 
 
monitoring the implications of fiscal measures on financial stability.16 Cooperation between all 
relevant national authorities has mutual benefits, both in terms of collecting information and 

assessing the impact of support measures not only on the real economy but also financial stability. 

On 27 May 2020, the ESRB issued Recommendation ESRB/2020/817 to national 
macroprudential authorities asking them to monitor the financial stability implications of 

debt moratoria, public guarantee schemes and other measures of a fiscal nature as well as 
to report relevant data to the ESRB. Under this recommendation, national macroprudential 
authorities are advised to (A) monitor the design features and uptake of measures in their 

jurisdictions as well as their implications for financial stability, and (B) to report to the ESRB the 

design features and uptake of measures. 

On 16 February 2021, the ESRB published a report on the financial stability implications of 

support measures aimed at protecting the real economy from the effects of the coronavirus 
(COVID-19).18 The report uses data from both Recommendation ESRB/2020/8 and banking data. It 
shows that the fiscal response designed to support the real economy helped stabilise bank lending 

and the functioning of the financial system. The report also identifies policy priorities for the design 

and duration of the fiscal measures, enhanced transparency and reporting, and preparedness for 

further adverse scenarios. 

1.4 
sectors 

Increasing vulnerabilities in the household and NFC 

Vulnerabilities in the household sector 

Fiscal support measures contained income and employment losses during the COVID-19 
crisis. Short-time work schemes helped mitigate the decline in employment and gross wages, 
while an increase in social transfers and, in part, temporary tax relief helped stabilise household 

gross disposable income. Disposable income declined by 2.6% y-o-y in the second quarter, before 

rising by 1.2% y-o-y in the third quarter and 0.7% in the fourth quarter (Chart 1.4.A). For 2020 as a 

whole, however, gross disposable income in the euro area grew marginally, by 0.2%, on the back 

of substantial growth of social transfers. The sustainability of household debt was not only 

supported by income support measures and loan moratoria, but also by the continuation of record-

low debt servicing costs on the back of expansionary monetary policy. 

16   See ESRB letter to the Economic and Financial Affairs Council on implications for the financial system of 

guarantee schemes and other fiscal measures to protect the real economy in response to the coronavirus, ESRB, 
14 May 2020. 

17  Recommendation ESRB/2020/8. 
18   See Financial stability implications of support measures to protect the real economy from the COVID-19 pandemic, 

ESRB, February 2021. 

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Chart 1.4.A 

Growth of disposable household income in the euro area 
The increase in social transfers in Q2 largely offset the decline in employee compensation 

(y-o-y percentage changes) 

Gross disposable income
Compensation of employees
Gross operating surplus and mixed income

Net property income
Direct taxes
Net social benefits and contributions

8

6

4

2

0

-2

-4

-6

-8

-10

-12

Q1 2020

Q2 2020

Q3 2020

Q4 2020

2020

Sources: Eurostat (QSA) and ESRB Secretariat calculations. 
Notes: Individual factors are calculated as the contribution to total gross disposable income growth. Data refer to the euro area 
only. 

Household debt continued to increase in 2020, but growth decelerated somewhat on the 
back of uncertainty about income and employment prospects. Growth in lending to euro area 
households slowed from 3.5% y-o-y in Q4 2019 to 3.2% y-o-y in Q4 2020. This slowdown reflected 

the deceleration in consumer lending, while mortgage lending slightly accelerated to 4.4% in 

December 2020 from 3.9% a year earlier. A tightening of lending standards in the course of 2020, 

as reflected in the ECB’s bank lending survey (BLS), on account of an increase in perceived risks, 

weighed on credit expansion for all types of loans. The household debt-to-GDP ratio in the euro 

area increased from 57.8% at end-2019 to 62.7% at end- 2020, in part reflecting the drop in 

nominal GDP (Chart 1.4.B). Overall, and in line with pre-crisis trends, total household debt levels 

held by monetary financial institutions (MFIs) increased by 3.2% at end-2020 compared with end-

2019 (Chart 1.4.C). 

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Chart 1.4.B 

Consumer and mortgage debt levels as a percentage of GDP 

Mortgage debt levels remained stable and in line with pre-crisis trends, whereas consumer debt 

decreased in a number of countries during the year 

(household loans as percentage of GDP) 

Euro area
DE
ES

Mortgage debt

FR
IT

70%

60%

50%

40%

30%

20%

10%

0%

Consumer debt

9%

8%

7%

6%

5%

4%

3%

2%

1%

0%

2010

2012

2014

2016

2018

2020

2010

2012

2014

2016

2018

2020

Sources: ECB (BSI), Eurostat and ESRB Secretariat calculations. 
Note: GDP figures refer to 2020 GDP. 

Chart 1.4.C 

Household debt in the euro area 

Household debt continued to increase in line with pre-crisis trends, mostly driven by loans for house 

purchases 

(LHS: EUR trillions; RHS: percent) 

Loans for house purchases (outstanding stock, left-hand scale)
Consumer loans (outstanding stock, left-hand scale)
Other lending (outstanding stock, left-hand scale)
Loans for house purchases (year-on-year growth rate, right-hand scale)
Consumer loans (year-on-year growth rate, right-hand scale)
Other lending (year-on-year growth rate, right-hand scale)

5.5

5.0

4.5

4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0.0

01/18

04/18

07/18

10/18

01/19

04/19

07/19

10/19

01/20

04/20

07/20

10/20

Sources: ECB (BSI) and ESRB Secretariat calculations. 

A Review of Macroprudential Policy in the EU in 2020 / July 2021 
Macro-financial environment 

7%

6%

5%

4%

3%

2%

1%

0%

-1%

-2%

-3%

-4%

23 

 
 
 
There was significant heterogeneity in household sector debt trends across EEA countries. 
This heterogeneity existed prior to the COVID-19 crisis and can be partly explained by the 

development of mortgage loans, which make up the biggest share of household debt. The 

COVID-19 crisis hit households in different ways across countries: while a notable decline in 
outstanding amounts of loans to households was recorded in some countries (CY19, ES, GR, IE, 

PL), most saw their loans to households increase (Chart 1.4.D).  

Chart 1.4.D 

Outstanding amounts of loans to households held by MFIs domestically, Jan 2020 - Jan 

2021 

Net lending to households in individual Member States was very heterogeneous 

(index: January 2020 = 100) 

115

110

105

100

95

90

85

AT BE BG CY CZ DE DK EE ES FI FR GR HR HU IE IT LT LU LV MT NL PL PT RO SE SI SK

Sources: ECB (BSI) and ESRB Secretariat calculations. 
Note: The blue bars show the outstanding amount, at the end of each month in 2020, of loans to households, indexed to 
January 2020 = 100. 

Looking forward, the debt repayment capacity of households will crucially hinge on the 
recovery path from the COVID-19 crisis. The longer the crisis lasts, the more pronounced its 
impact on household balance sheets will be. While Member States have been extending several 

fiscal measures to avoid cliff effects, they will expire at some point or be replaced with more 

targeted measures. In addition, household balance sheet stress will become more visible when 

debt service moratoria expire in the course of 2021. Moreover, concerns about household debt 

sustainability may also be rising in countries in which stretched asset valuations for residential real 

estate already prevailed prior to the crisis (Section 1.7). 

Vulnerabilities in the non-financial corporate sector 

The COVID-19 shock caused a pronounced deterioration in NFC sector balance sheets. This 
was driven by falling sales, declining actual and expected profitability, and rising indebtedness. 

19  The reduction in outstanding loans to households held by MFIs in Cyprus in 2020 was largely driven by the sale of banks’ 

NPL portfolios to credit-acquiring companies and write-offs.  

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24 

 
 
 
While the large-scale liquidity support to the NFC sector was a necessary line of defence to prevent 

a broad-based meltdown, it further increased NFC sector indebtedness (Chart 1.4.E). Bank net 

credit flows to NFCs increased significantly in 2020 compared to 2019 in most countries amid large 

cross-country heterogeneity reflecting different volumes and structures of public support measures, 
especially public loan guarantees and loan moratoria20 (Chart 1.4.E). The outstanding stock of bank 
loans to the NFC sector increased by 6.7% in nominal terms between end-2019 and end-202021, 

while the stock of NFC debt securities increased by 10.9% (Chart 1.4.F). This increase was 

particularly pronounced in EU countries with elevated pre-crisis NFC sector debt levels, taking into 

account loans and debt securities. As a result, the crisis compounded cross-country heterogeneity 

(Chart 1.4.G). Moreover, companies in countries with elevated corporate debt levels experienced 

the largest loss in gross operating surplus (Chart 1.4.H), reflecting the differentiated magnitude and 

sectoral composition of the economic shock. On aggregate, a large part of the additional NFC 

sector borrowing in Q2 was used to increase cash buffers—implying that net debt in this quarter 

remained broadly stable. 

Chart 1.4.E 

Bank credit to NFCs 
Net credit flows increased significantly in 202022 

(percentage of 2019 GDP) 

2019
2020

6%

5%

4%

3%

2%

1%

0%

-1%

-2%

-3%

LT

IE

SI PL LV CZ HU DK HR RO SE NL LU BE BG CY EE SK DE AT MT FI PT ES IT GR FR

Sources: ECB (BSI), Eurostat and ESRB Secretariat calculations. 
Notes: Credit flows are defined as financial transactions under the BSI framework. The definition of a financial transaction is the 
change in the outstanding amount at the end of two periods, minus the changes due to revaluations and reclassifications. 
Annual averages are used. 

20   By shifting amortisation payments for participating loans to the future, debt service moratoria temporarily reduced the 

impact of maturing loans on net lending flows. 

21   The total stock of loans to NFCs grew by only 2.4%, as the increase in the stock of NFC loans granted by MFIs (+6.7% 

between end-2019 and end- 2020) was largely offset by decreasing stocks of loans granted by other financial institutions 
(OFIs) and counterparties outside of the euro area (-3.3% and -6.5%, respectively). OFIs and counterparties outside of the 
euro area together accounted for about 42% of the total stock of NFC loans. Loans granted by insurance corporations and 
pension funds (ICPFs) grew by 14.2% and loans granted by governments by 30.0%. The shares of these sectors in NFC 
loans are small though at 1.0% and 2.7%, respectively. 

22   Although new lending in Cyprus was subdued in 2020, the stock of loans recorded a positive annual growth rate at end-

2020 as the suspension of instalments for loans under moratoria had a positive impact (due to interest rate capitalization) 
on the stock of loans. Loans under moratoria represent a significant percentage of total loans in the banking sector. 

A Review of Macroprudential Policy in the EU in 2020 / July 2021 
Macro-financial environment 

25 

 
 
 
Chart 1.4.F 

NFC debt composition in the euro area 

Total NFC debt in the euro area increased significantly as a result of increased loan extensions 

(EUR billions) 

Total debt
Loans
Debt securities

12,000

10,000

8,000

6,000

4,000

2,000

0
03/18

09/18

03/19

09/19

03/20

09/20

Sources: Eurostat (QSA) and ESRB Secretariat calculations. 

Chart 1.4.G 

Outstanding amounts of loans to NFCs held by MFIs domestically, Jan 2020 - Jan 2021 

Developments to NFC credit in the individual Member States were very heterogeneous 

(index: January 2020 = 100) 

115

110

105

100

95

90

85

AT BE BG CY CZ DE DK EE ES FI FR GR HR HU IE IT LT LU LV MT NL PL PT RO SE SI SK

Sources: ECB (BSI) and ESRB Secretariat calculations. 
Note: The blue bars show the outstanding amount, at the end of each month in 2020, of loans to NFCs, indexed to January 
2020 = 100. 23 

23   The reduction in outstanding loans to NFCs held by MFIs in Cyprus in 2020 was largely driven by the sale of banks’ NPL 

portfolios to credit-acquiring companies and write-offs. 

A Review of Macroprudential Policy in the EU in 2020 / July 2021 
Macro-financial environment 

26 

 
 
 
 
Chart 1.4.H 

Operating surplus and total financial debt levels in the NFC sector 

Member States with higher pre-crisis NFC debt experienced a more severe decline in NFC 

operating surpluses during the COVID-19 crisis 

(x-axis: Q3 2020 operating surplus as percentage of Q3 2019 surplus; y-axis: NFC debt levels as percentage of GDP as of Q3 
2020) 

P
D
G

f
o
e
g
a
t
n
e
c
r
e
p
a
s
a

s
l
e
v
e
l

t
b
e
d
C
F
N

200%

180%

160%

140%

120%

100%

80%

60%

40%

20%

0%

FR

BE

SE

DK

NL

ES

PT

FI

AT

GR

EE

IT

DE

SI

CZ

PL

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

Year-on-year growth operating surplus Q3 2020

Sources: Eurostat (QSA) and ESRB Secretariat calculations. 
Notes: Sample of countries based on available operating surplus data. Ireland was excluded from the sample as operating 
surplus figures are significantly influenced by the presence of large multinational corporations. 

The scale of government support to the NFC sector to a large extent concealed and 
postponed the surge in NFC sector vulnerabilities. The wave of corporate insolvencies that 
might have been expected on account of the severity of the COVID-19 crisis has not yet 

materialised. Insolvency rates declined in 2020 compared with the previous year. However, the 

longer the crisis lasts, the more companies will exhaust the scope for short-term cost-saving 

measures and deplete their cash buffers to compensate for the drop in cash flow. At the same time, 

the NFC sector will be increasingly confronted with a rising debt burden—the downside of the far-

reaching reliance on large-scale liquidity-support measures—, implying that for vulnerable firms the 

liquidity crisis may morph into a solvency crisis. Once fiscal support measures, debt moratoria and 

temporary deferrals of insolvency procedures expire, a significant increase in insolvencies could be 

expected (Chart 1.4.I). In the second half of 2020, however, net debt levels stopped increasing as a 

result of a rise in liquid assets combined with a slowdown in the accumulation of gross debt (Chart 

1.4.J). 

A Review of Macroprudential Policy in the EU in 2020 / July 2021 
Macro-financial environment 

27 

 
 
 
 
 
 
 
 
 
Chart 1.4.I  

Insolvency forecasts for 2020 and 2021 

Insolvency levels are expected to rise over time 

(percentage change from the previous year) 

2020
2021 forecast
Cumulative change 2020-2021

70

60

50

40

30

20

10

0

-10

LT

FR NL EE

IE

ES CZ BG SK BE

IT GR EU* RO LV PT LU AT DE NO DK

FI

PL SE HU

Sources: Euler Hermes and Allianz Research. 
Notes: Forecasts for DE, FR, ES, IT and NL are based on a revised version of the Euler Hermes and Allianz Research report 
dated 24 September; those for other countries are based on the previous report dated 16 July. EU* refers to the GDP-weighted 
sample of countries shown in the chart. 2020 figures come from Euler Hermes' database. 

Chart 1.4.J 

Change in liquid assets, gross debt and net debt of NFCs since Q4 2019 in the euro area 

Due to a slowdown in gross debt growth in Q3, net debt started to decrease in the latter half of 

2020 

(change since Q4 2019, EUR billions) 

Liquid assets
Gross debt
Net debt

600

500

400

300

200

100

0

-100

-200

-300

-400

-500

Q1 2020

Q2 2020

Q3 2020

Q4 2020

Sources: Eurostat (QSA) and ESRB Secretariat calculations. 
Notes: “Liquid assets” comprise deposits and currency; “Gross debt” includes debt securities and loans; “Net debt” is the 
difference between gross debt and liquid assets. A positive net debt indicates a decline in net debt compared with Q4 2019, as 
the growth of liquid assets exceeded the growth of gross debt. 

A Review of Macroprudential Policy in the EU in 2020 / July 2021 
Macro-financial environment 

28 

 
 
 
Research based on firm-level data suggests that the number of firms in distress could 
substantially increase. IMF staff research assessed the impact of the COVID-19 crisis on the 
liquidity and solvency of the NFC sector in European countries, taking into account the effects of 
public support measures.24 It found that the announced policy packages in advanced EU 
economies could reduce the pandemic-induced liquidity gap by four-fifths to about 5% of GDP. 

However, cross-country heterogeneity was very significant, with Greece, Slovakia, Portugal and 

Italy showing the highest remaining liquidity gap. Compared with their impact on liquidity, public 

support measures were found to be significantly less effective in addressing solvency gaps, as 

several policy measures—such as debt moratoria, tax deferrals, and guaranteed loans—address 

only liquidity but not solvency strains. As a result, less than two-fifths of the increase in solvency 

gaps in advanced EU economies was estimated to be covered by policies (versus four-fifths for 

liquidity gaps), implying that the share of insolvent firms could increase from 11% to 17% amid 

pronounced country heterogeneity. However, given that the impact of policies was assessed on the 

basis of their announced size and not their actual take-up, the results are subject to an optimistic 

bias, given that take-up rates, for example for public loan guarantees, often fell significantly short of 
announced envelopes. BIS staff research25 found that the drastic fall in corporate earnings severely 
impaired the interest coverage ratio of many firms, implying that their survival is at risk if earnings 
remain depressed for an extended period, while cash buffers may provide only limited protection.26 

Moreover, while covering losses through new borrowing is essential for preventing firm exits in the 

short run, exit pressures emanating from rising indebtedness may build up over time, possibly 
leading to a wave of exits at a later stage.27 A European Commission study concluded that on 

account of the COVID-19 shock between 25% and 35% of companies would experience a financing 

shortfall by the end of 2020 after exhausting working capital and liquidity buffers, respectively. In an 
adverse scenario, these shares could increase to 35% and 50%, respectively.28 An OECD 
simulation29 predicted that—in the absence of any policy intervention—30% of the firms in the 
sample would face a cash shortfall after two months of lockdown and more than 50% of firms after 

a lockdown of seven months. These results mainly reflect the impact of confinement in the 

24   Ebeke, C., Jovanovic, N. , Valderrama, L. and Zhou, J., “Corporate Liquidity and Solvency in Europe during COVID-19: 
The Role of Policies”, IMF Working Paper WP21/56, International Monetary Fund, March 2021. The simulations of the 
effects of the COVID-19 pandemic on corporate solvency and liquidity are based on firm-level data for balance sheet and 
income statements from Orbis. Country coverage includes all European economies with a sufficient coverage in Orbis, 
which in this study amounts to 26 countries. 

25   Banerjee, R. and Kharroubi, E., “The financial vulnerabilities driving firms to the exit”, BIS Quarterly Review, Bank for 

International Settlements, December 2020. 

26   An earlier BIS study estimated that, if revenues in 2020 declined by 25%, debt service and operating costs would exceed 

cash buffers and revenues for 40% of the sampled corporates from 26 countries, assuming that these companies were able 
to rollover their maturing debt in 2020; see Banerjee, R., Illes, A., Kharroubi, E. and Serena, J. M., “Covid-19 and 
corporate sector liquidity”, BIS Bulletin No 10, Bank for International Settlements, April 2020. 

27   The BIS study finds that high short-term debt and low earnings relative to interest expenses are the two most significant 
financial predictors of firm exits, with a lag between a rise in corporate vulnerabilities and the peak in exits amounting to 
about two years. 

28  

Identifying Europe’s recovery needs, Commission Staff Working Document, European Commission, May 2020. The 
study uses ORBIS-based data on balance sheets, income and cash flows to estimate the impact of the economic downturn 
on firms’ profits and losses, taking into account the implicit solvency support provided by governments through short-term 
work schemes. 

29   Corporate sector vulnerabilities during the Covid-19 outbreak: assessment and policy responses, Organisation for 
Economic Co-operation and Development, May 2020. The methodology used by the OECD to evaluate firms’ liquidity 
position during the COVID-19 crisis is based on ORBIS data on financial statements of non-financial corporations 
comprising both listed and unlisted firms in 16 European countries with sufficient coverage. However, the OECD data set 
excludes firms with less than three employees. “The economic shock from measures of social distancing is modelled as a 
change in firms’ operating cash flow, resulting from the decline in sales and firms’ limited ability to fully adjust their 
operating expenses. To reflect this adjustment capacity, elasticities of intermediate costs to sales and of the wage bill to 
sales are estimated by assuming, for simplicity, that they are identical and constant across countries and sectors.” 

A Review of Macroprudential Policy in the EU in 2020 / July 2021 
Macro-financial environment 

29 

 
 
particularly hard-hit sectors. When policy support measures (tax deferrals, debt moratoria and wage 

bill subsidies) were taken into account, the share of firms facing a liquidity shortfall after a two-

month lockdown declined from 30% to 10%. Gourinchas et al. estimated that due to COVID-19, the 

bankruptcy rate in the SME sector in 19 European countries could rise by about 9 percentage 

points, with pronounced sectoral heterogeneity on account of sector-specific demand and supply 
shocks and their interaction.30 Overall, the above-referenced approaches as well as other research 

must be interpreted with caution as they rely on several key assumptions. Nonetheless, despite 

their divergence, they all support the case for decisive and sustained public intervention to contain 

the rise of bankruptcies. 

Looking ahead, the resilience of the NFC sector hinges crucially on the economic recovery 
path as well as the scope and effectiveness of policy support measures. Given the already 
heightened vulnerability of this sector, a premature withdrawal of support measures or a perceptible 

tightening in financing conditions could trigger a sharp increase in default rates—particularly for 

firms which increased their leverage ratio in recent years or became overindebted or non-viable 

during the pandemic. The high debt burden and its impact on employment and investment poses a 
threat to a swift and sustained recovery.31 Given that the use of loan moratoria has been 

particularly pronounced for SMEs, which also benefited from public loan guarantees, the expiration 
of these measures would hit SMEs particularly hard.32 Moreover, as SMEs often struggle to avail 

themselves of market-based funding sources, they are more exposed to a tightening of bank 

lending standards. 

1.5 

Strengthening of the sovereign-bank-corporate nexus 

The sovereign-bank nexus strengthened during the COVID-19 crisis. The doom loop between 
banks and their domestic sovereign was a key factor in the euro area sovereign debt crisis. In 

contrast to the global financial crisis, the COVID-19 crisis did not have its origin in the financial 

sector. Importantly, the public support measures, some of which implied an increase in sovereign 

debt, were crucial in mitigating difficulties in the corporate and financial sectors. However, there is a 

risk that intensifying vulnerabilities in the corporate sector could spill over to banks and the 

sovereign. 

30   Gourinchas, P. O., Kalemli-Özcan, Ṣ., Penciakova, V. and Sander, N., “COVID-19 and SME Failures”, NBER Working 
Paper 27877, National Bureau of Economic Research, September 2020, revised May 2021. The authors use a model-
based partial equilibrium approach to assess the impact of the COVID-19 crisis on business failures in the SME sector in 
18 European countries, whereby the model is mapped to firm-level data using the latest version of the ORBIS global 
dataset. 

31   Relying on regression analysis and looking at the historical relationship between firms’ leverage and investment, an OECD 
study examined the potential impact of higher debt levels on investment during the recovery. It found that a 15 pp (1 
standard deviation) increase in firms’ financial leverage would lower the investment rate by 30% in firms with median pre-
crisis leverage. Firms at the top of the leverage distribution before the crisis would lower investment by more than half in 
response to the same increase in their leverage. See Demmou, L, Calligaris, S., Franco, G., Dlugosch, D., McGowan, M. A. 
and Sakha, S., “Insolvency and debt overhang following the COVID-19 outbreak: Assessment of risks and policy 
responses”, OECD Economics Department Working Papers, No 1651, Organisation for Economic Co-operation and 
Development, January 2021. 

32   The flow of new credit to NFCs has been stronger for SMEs, and 35% of the new credit benefited from either public 

guarantees or public loans. See Financial stability implications of support measures to protect the real economy 
from the COVID-19 pandemic, ESRB, February 2021. 

A Review of Macroprudential Policy in the EU in 2020 / July 2021 
Macro-financial environment 

30 

 
 
The exposure of European banks to domestic sovereign debt increased significantly in 2020 
after the outbreak of the COVID-19 pandemic. Compared to December 2019, the exposure at 
end-June was 9% higher in the euro area (+12% in the EU, Chart 1.5.A). The increase was 

particularly large in CZ, EE, LV and MT (more than 45% at end-June), as well as in FR (+20%) and 

ES (+14%), compared to DE (less than 5%, Chart 1.5.A). The rise observed in 2020 ended a period 

of more than four years of declining domestic sovereign debt exposures. The share of domestic 

sovereign exposures in total bank assets significantly differed from country to country (Chart 1.5.B 
and Chart 1.5.C33). It was particularly elevated in RO, HU, HR and PL (more than 20%) but also in 

Italy (17.5%), PT (10.1%) and ES (9.6%). In contrast, exposures in FR and DE amounted to less 

than 5% (Chart 1.5.B). An increase in sovereign exposures is of particular concern when the 

respective country already had an elevated public debt-to-GDP ratio prior to the crisis (e.g., IT, GR 

and PT; Chart 1.5.C). Risks can be compounded when an increase in the exposure of domestic 

banks to their respective sovereign is accompanied by an increase in their exposure to other euro 
area sovereigns for which risks are highly correlated.34 This is the case for PT for instance, where 

the exposure to sovereigns from IT, GR and ES as a percentage of total assets has been 

increasing faster than the exposure to its domestic sovereign since the beginning of 2020, albeit 
remaining smaller than the domestic sovereign exposure.35 At the same time, the exposure of 

sovereigns to domestic banks has also increased, as banks have been absorbing a considerable 

portion of the government bonds issued to finance public support measures. Moreover, rising 

solvency pressures in the NFC sector could affect the health of exposed banks, with potential 

repercussions for the respective sovereigns. 

33   Chart 1.5.A, Chart 1.5.B and Chart 1.5.C include loans and securities, while Chart 1.5.D includes securities only. 

34   For banks in ES, GR, IT and PT, the correlation between the exposure to their domestic sovereign and to the sovereigns of 
other countries in the group is highly significant and positive. For the group as a whole, the correlation could be as high as 
0.9 (T = 20.8). 

35   According to COREP and FINREP data, the exposure of Portuguese banks to the domestic sovereign as a percentage of 
total bank assets increased by 0.7 percentage points between March 2020 and September 2020, while the exposure of 
Portuguese banks to the domestic sovereign plus to the sovereigns of IT, ES and GR as a percentage of total bank assets 
increased by 2.3 percentage points.  

A Review of Macroprudential Policy in the EU in 2020 / July 2021 
Macro-financial environment 

31 

 
 
Chart 1.5.A 

EU banks’ exposure to domestic sovereign debt 
EU banks increased their exposure to domestic sovereign debt in 2020 after several years of 

decline 

(MFI sovereign debt exposure growth, indexed to December 2019) 

EA
EU
DE
ES

FR
IT
PT

130

125

120

115

110

105

100

95

90

01//17

07//17

01//18

07//18

01//19

07//19

01//20

07//20

01//21

Sources: ECB (BSI) and ESRB Secretariat calculations. 
Notes: December 2019 = 100. Sovereign debt consists of debt securities and loans. Last data point used: February 2021. 

Chart 1.5.B 

EU banks’ exposure to domestic sovereign debt as a percentage of total assets 
The exposure of European banks to domestic sovereign debt as a percentage of total assets 

increased in 19 Member States between 2019 and 2020 

(2019-2020 change in MFI sovereign debt exposure as a percentage of total MFI assets) 

October 2019
October 2020
Percentage point change

25%

20%

15%

10%

5%

0%

-5%

RO HU PL HR IT

SI PT SK ES CY BG CZ GR BE DE AT FR LT MT FI

LV NL DK SE EE IE LU

Sources: ECB (BSI) and ESRB Secretariat calculations. 
Note: Sovereign debt consists of debt securities and loans. 

A Review of Macroprudential Policy in the EU in 2020 / July 2021 
Macro-financial environment 

32 

 
 
 
Chart 1.5.C 
EU banks’ domestic sovereign exposure, NFC debt and public debt36 
NFC sector vulnerabilities potentially compound the sovereign-bank nexus 

(x-axis: NFC debt as a percentage of GDP; y-axis: sovereign exposure as a percentage of MFI total assets) 

l
a
t
o
t

f
o

e
g
a
t
n
e
c
r
e
p
a
s
a
e
r
u
s
o
p
x
e
n
g
i
e
r
e
v
o
S

25

20

15

s
t
e
s
s
a

10

5

0

Public debt (percentage of GDP)

RO

PL

HU

HR

SI

SK

CZ

LT

LV

DE

0

20

40

IT

BG

GR

EE

60

ES

PT

MT

AT

BE

FI

DK

SE

NL

IE

CY

80

100

120

140

160

180

NFC debt as percentage of GDP

Sources: ECB (BSI & GFS) and Eurostat. 
Notes: MFI exposure to the domestic sovereign includes debt securities and loans. NFC debt includes loans and securities and 
is consolidated. The size of the bubbles reflects the public-debt-to-GDP ratio. Data refer to Q3 2020. 

36  

In CY, NFC debt includes special-purpose entity (SPE) debt, which consists of debt of foreign companies to mostly foreign 
banks and as such does not give rise to financial stability issues for the Cypriot banking system. Adjusting for SPEs, NFC 
debt amounted to 107.5% of GDP in Q3 2020. In IE, private sector debt is significantly influenced by the presence of large 
multinational corporations. Restructuring by these entities has resulted in extremely large movements in Irish private sector 
debt, particularly from 2014 onwards. 

A Review of Macroprudential Policy in the EU in 2020 / July 2021 
Macro-financial environment 

33 

 
 
 
 
 
 
 
 
 
 
 
Chart 1.5.D 

Exposure of euro area banks to domestic sovereign debt securities 

After declining since 2015, the exposure of euro area banks to domestic sovereign debt securities 

increased again during the COVID-19 crisis 

(EA banks’ exposure to domestic sovereign debt securities as a percentage of total bank assets) 

Euro area
Germany
Spain

France
Italy

14%

12%

10%

8%

6%

4%

2%

0%

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Sources: ECB (BSI) and ESRB Secretariat calculations. 
Notes: EA banks’ exposure to domestic sovereign debt securities. Last data point: April 2021. 

High and rising sovereign exposures increase the vulnerability of banks to a potential rise in 
risk premia. Decisive monetary and prudential measures helped reverse valuation losses of banks’ 
sovereign portfolios that occurred early in the crisis. Moreover, only 47% of banks’ sovereign debt 
exposures are currently subject to fair value accounting37, thereby mitigating the impact of potential 
valuation changes on CET1 ratios.38 However, looking ahead, further increases in sovereign 

exposures may compound the vulnerability of banks to valuation changes. A further increase in 

public debt could result in rising sovereign risk premia and heighten the risk of sovereign rating 

downgrades, which, in turn, could trigger a subsequent wave of domestic bank rating downgrades 
and a concomitant deterioration in bank financing conditions in the respective country.39 
Vulnerabilities are particularly elevated where domestic sovereign exposures are close to or exceed 

CET1 capital, which is the case for ten euro area countries (Chart 1.5.E). 

37   Only part of banks’ assets is subject to fair value accounting. These assets are in general financial assets used for trading 
purposes, while loans are usually measured at amortised costs as they are assumed to be kept longer on the balance 
sheet. 

38   A case can also be made that banks and other institutional investors play a fundamental role in reducing price volatility in 

their national sovereign debt market by acting as “contrarian investors” in times of market stress. 

39   While the increase in public sector debt-to-GDP ratios will partially reverse once GDP recovers, the elevated nominal debt 
levels will have a persistent effect on governments’ debt service needs going forward. Moreover, higher debt levels render 
sovereigns more vulnerable to a tightening of financing conditions. 

A Review of Macroprudential Policy in the EU in 2020 / July 2021 
Macro-financial environment 

34 

 
 
 
Chart 1.5.E 

EA banks’ exposure to domestic sovereign debt as a percentage of CET1 capital 
Exposure to domestic sovereign debt is close to or exceeds CET1 capital in ten euro area countries 

(EA bank exposure to domestic sovereign debt, percentage of CET1 capital) 

Range 2014 - 2020
Q3 2019
Q3 2020

300

250

200

150

100

50

0

PT

MT

BE

CY

NL

IT

DE

ES

GR

FR

SI

LT

FI

AT

IE

LV

SK

LU

EE

Sources: FINREP, COREP and ESRB Secretariat calculations. 
Notes: The range shows the difference between the minimum and maximum value of the ratio between 2014 and 2020. 
Exposure to domestic sovereign debt includes loans, securities and advances. 

Vulnerabilities of NFCs further exacerbated the sovereign-bank nexus – effectively turning it 
into a sovereign-bank-corporate nexus. Government loan guarantees, loan moratoria and 
moratoria on insolvency filings have so far prevented a large-scale wave of NFC defaults. However, 

the longer the COVID-19 crisis lasts, the more pronounced its impact on liquidity and – for a 

sizeable number of companies – solvency will be, resulting in a rising number of bankruptcies 

(Section 1.4). The consequences of the sovereign-bank-corporate nexus are twofold: first, as public 

loan guarantees were mostly granted only for newly extended loans, they cover only a fraction of 
the outstanding stock of bank credit to the NFC sector40 – with very large cross-country variations – 
implying that banks will need to shoulder the bulk of the deterioration in asset quality. Second, 

rising NFC sector vulnerabilities will be reflected in a higher share of called-up loan guarantees and 

a further perceptible rise in public debt. Public debt levels may also increase further on account of 

implicit contingent liabilities, i.e. liabilities arising from political commitments to keep vulnerable 

companies afloat through liquidity or equity support. In both cases, the increase in public debt could 

lead to a repricing of sovereign risk, which would limit the scope for additional sovereign debt and 

therefore constrain the fiscal space to sustain the support for the corporate sector. It could also 

raise pressure on domestic banks to step up purchases of domestic sovereign debt securities. 

Overall, the strength of bank and government balance sheets crucially hinges on the recovery of 

the corporate sector. It is therefore of particular concern that highly indebted sovereigns are 
exposed to domestic NFC sectors that were particularly affected by the pandemic.41 Moreover, the 

40  Such public loan guarantees tend to be focused on newly issued medium to long-term loans. See Financial stability 

implications of support measures to protect the real economy from the COVID-19 pandemic, ESRB, February 2021 
and “Public loan guarantees and bank lending in the COVID-19 period”, Economic Bulletin, Issue 6, ECB 2020. 
41   This in part reflects the different sectoral composition of the corporate sector, with the weight of highly affected sectors 

(such as tourism and hospitality) being particularly pronounced. 

A Review of Macroprudential Policy in the EU in 2020 / July 2021 
Macro-financial environment 

35 

 
 
 
recovery paths of banks and corporates also depend on the fiscal space of governments and the 

sustainability of their debt. 

Finally, rising NPL levels would also negatively affect the NFC sector. Experience with 
previous financial crises has shown that rising NPL levels and the associated pressure on 

profitability and bank capital go hand in hand with a slowdown in the extension of credit to the 

private sector, thereby putting at risk the role of the banking sector in supporting the recovery from 

the COVID-19 crisis through favourable financing conditions. 

1.6 

Financial market developments 

The pandemic-related turmoil in financial markets in March 2020 was followed by a 
remarkable rebound in asset prices. Following the market turmoil in March 2020, financial 
conditions eased on the back of swift and broad-based monetary and fiscal policy measures. 

Better-than-previously-forecast macroeconomic data, the increased credibility of policy support—

including on account of the political agreement on the Next Generation EU (NGEU) package on 

21 July 2020—and the roll-out of COVID-19 vaccinations significantly improved investor sentiment. 

These factors were reflected in a narrowing of credit spreads and rising equity market valuations. In 

the EU, sovereign bond market yields gradually declined, notwithstanding a perceptible increase in 

public debt-to-GDP ratios. This decline was supported by large-scale central bank purchases of 

sovereign bonds as well as the agreement on the EU recovery fund. 

The strength of the rebound in equity markets is not fully reflected in analysts’ expectations 

of future earnings and may point to a disconnect between asset prices and economic 
fundamentals. The strength of the equity market rebound varied across countries and sectors. The 
strongest equity price increases were recorded in the United States and the technology sector 

(Chart 1.6.A and Chart 1.6.B). In the EU, the rebound in equity markets was somewhat less 

pronounced amid resurfacing concerns about longer-term earnings expectations on account of 

resurging COVID-19 infections in October 2020. There was also pronounced heterogeneity in 

equity market trends in the EU, reflecting differences in earnings growth expectations across the 

European NFC sector as a result of the differentiated sectoral and country-specific impact of the 

COVID-19 crisis. Cyclically adjusted price/earnings ratios, which measure prices relative to longer-

run past earnings, remain below their long-run median values in all major economic regions, with 

the exception of the United States, where there is some evidence of stretched valuations.  

A Review of Macroprudential Policy in the EU in 2020 / July 2021 
Macro-financial environment 

36 

 
Chart 1.6.A 

Market indices indexed on the first trading day of 2020 

Equity markets’ index performance since January 2020 

(1 January 2020 = 100) 

US - S&P 500
JP - NIKKEI
DE - DAX
NL - AEX
Euro Stoxx 50

FR - CAC 40
IT - FTSE MIB
UK - FTSE 100
ES - IBEX 35

140

130

120

110

100

90

80

70

60

01/20

02/20 03/20

04/20 05/20

06/20 07/20

08/20

09/20 10/20

11/20 12/20

01/21

02/21 03/21

04/21 05/21

06/21

Sources: Bloomberg and ESRB Secretariat calculations. 
Notes: All indices are recorded in local currencies and indexed on the 1 January 2020. Subsequently, movements in the foreign 
exchange markets could affect these indices and thus the movements in the series used in this chart. 

Chart 1.6.B 

Variation of prices and forward earnings among the sub-indices of the EURO STOXX 

While certain sub-indices performed well during the pandemic relative to others, all have since seen 

a decline in forward earnings, indicating a somewhat pessimistic outlook on the recovery phase 

Change in 18M foreward-earnings
Change in price-subindex

(percentage change) 

Automobiles and parts
Technology
Personal and household goods
Basic resources
Chemicals
Industrial goods and services
Media
Construction and materials
Travel and leisure
Utilities
Banks
Telecommunications
Healthcare
Food and beverage
Real estate
Oil and gas

-80%

-60%

-40%

-20%

0%

20%

40%

60%

Sources: Reuters (IBES) and ESRB Secretariat calculations. 
Note: Latest data from 8 June 2021; all numbers relative to the monthly average of January 2020. 

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Notwithstanding rising NFC sector vulnerabilities, credit spreads on corporate bond 

markets narrowed between March 2020 (their peak) and December 2020 and approached 
pre-pandemic levels across the rating spectrum. The narrowing of credit spreads was 
supported by continued investor inflows into euro area corporate bond funds and reflected the 

renewed search for yield on the back of improved risk sentiment. Following the rebound, corporate 

bond spreads are well below the levels observed during the global financial crisis and the euro area 

sovereign debt crisis and appear to be tight in view of corporate earnings projections and the credit 

rating outlook (Chart 1.6.C). This is particularly the case for the high-yield segment of the corporate 

bond market. This compression of corporate bond spreads raises the risk that a weaker-than-

expected economic recovery could lead to a sudden widening of corporate spreads. 

Chart 1.6.C 

Z-spread for euro area NFCs by credit rating 

Credit spreads increased drastically at the onset of the pandemic before returning to pre-pandemic 

levels over the course of the year 

(Z-spread for euro area NFCs by rating in basis points) 

End January 2020
End March 2020
End June 2020

End September 2020
End December 2020

1,400

1,200

1,000

800

600

400

200

0

AAA

AA

A

BBB

BB

B

Sources: iBoxx, indices for EUR NFCs, three to five-year maturities. 

While continuing to provide financing to the NFC sector following the initial COVID-19 
shock, non-bank financial intermediaries have increased their risk-taking. The low interest 
rate environment continues to strengthen incentives for investors to increase their exposure to 

riskier assets to generate higher returns. As inflows into euro area investment funds recovered in 

the course of 2020, non-bank financial intermediaries increased their exposure to lower-rated NFC 

debt, while also extending the duration of their NFC debt portfolio. This raised their vulnerability to 

outflows, notably as valuation changes are passed to investors, who may reassess the credit risk of 

NFCs. While corporate bond funds temporarily increased their cash holdings following the market 

turmoil in March 2020, cash positions subsequently declined to pre-crisis levels. The investment 

fund sector as a whole increased its exposure to less liquid assets, thereby increasing the 

vulnerability to sizeable outflows should severe market tensions re-emerge. 

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1.7 
estate 

Developments in residential and commercial real 

Residential real estate 

The ESRB analysed vulnerabilities in the RRE sector and issued recommendations and 
warnings to several members in 2016 and 2019. Following the methodology outlined in its 
corresponding report42, the ESRB published in 2019 a report on vulnerabilities in the RRE sector in 
EEA countries43, concluding that most countries were in a firm or mature expansionary phase of the 

residential real estate cycle. A number of risks were identified and ESRB recommendations for six 

particularly vulnerable countries put forward a number of macroprudential policy proposals to 
address those risks. In addition, warnings were issued for five other countries.44 

Subsequently, RRE prices continued to rise in 2020 in real terms despite the COVID-19 
pandemic. For the EU, the increase amounted to 5.4%y-o-y as of Q4 2020, with cross-country 
variation ranging from 0.2% in Romania to 17.3% in Luxembourg. The resilience of the RRE market 

was supported by several factors. First, government support measures mitigated the impact of the 

crisis on real disposable household incomes (Section 1.4). Second, the continuation of extremely 

favourable financing conditions helped sustain growth in mortgage lending and housing demand. 

Third, in the context of low interest rates and high uncertainty, housing continued to be perceived 

as an attractive investment. Moreover, the increase in home office work arrangements may have 

strengthened demand for more convenient and spacious housing in suburban areas and the 

countryside. Finally, as home ownership tends to be more widespread in higher income brackets, 

which were less affected by the crisis, overall demand for housing may have been less affected by 

the rise in labour market slack.  

The continued increase in house prices in 2020 further exacerbated the overvaluation of 
house prices prevailing prior to the crisis. Price-to-income ratios in Q4 2019 were around 50% 
higher than their long-term trend for Luxembourg and Sweden (Chart 1.7.A). For another seven EU 

countries, they exceeded their long-term trend by close to or more than 10%. For five other 

countries, this indicator points to an undervaluation of at least 10%. While being surrounded by 

elevated uncertainty, evidence from econometric models suggests a similar trend. The indicators of 

overvaluation are shown for Q4 2019 as in 2020 some of the explanatory variables were affected 

by temporary factors related to the COVID-19 crisis that did not reflect to the same extent an 

overvaluation of house prices.  

42   See Methodologies for the assessment of real estate vulnerabilities and macroprudential policies: residential real 

estate, ESRB, September 2019. 

43   See Vulnerabilities in the residential real estate sectors of the EEA countries, ESRB, September 2019. 
44  

In 2019, the ESRB adopted warnings for five Member States and recommendations for six Member States on medium-term 
vulnerabilities in the residential real estate sector. The warnings were sent to the competent ministers of the following five 
countries: the Czech Republic, Germany, France, Iceland and Norway. Similarly, the recommendations were sent to the 
competent ministers of the following six countries: Belgium, Denmark, Luxembourg, the Netherlands, Finland and Sweden. 
See the corresponding press release.  

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Chart 1.7.A 

Measures of house price overvaluation 
Further house price increases led to stronger overvaluation in several countries 

(percentages, sorted by house price growth) 

Price-to-income, deviation from long-term trend
Overvaluation econometric model
Real housing price growth (annual)

50

40

30

20

10

0

-10

-20

-30

-40

LU LT PT HR SK PL EE DE GR NL CZ LV BE SI SE FR AT MT DK BG ES HU RO CY IT

FI

IE

EU

Source: ECB.  
Notes: For the price-to-income ratio and the econometric model, the last data point is Q4 2019. For real housing price growth, 
the last data point is Q3 2020 for all countries except CY (Q2 2020). Annual real housing price growth is the average year-on-
year growth over the last four quarters. The EU overvaluation figures refer to the median EU country. The ECB’s estimates may 
differ from those of national authorities. For instance, according to estimates from the Nationale Bank van België/Banque 
Nationale de Belgique, the overvaluation was 13.5% in Belgium in Q2 2020. The house price overvaluation was estimated to be 
around -10% in Denmark (whole country). Finally, the estimated average overvaluation in Luxembourg, based on the average of 
econometric models and statistical methods, stood at 20.1% in Q3 2020 according to the Central Bank of Luxembourg. 

Growth in average rents somewhat decelerated in the EU following the onset of the 
COVID-19 pandemic. Rent growth in the euro area declined from 1.7% y-o-y in January 2020 to 
1.3% in December 2020 (Chart 1.7.B). Except for Austria, Belgium, the Netherlands and Slovakia, 

all EU countries reported a lower or unchanged annual growth in rents in December 2020 

compared to one year earlier. 

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Chart 1.7.B 

Rental index for the EU 

Rent growth declined during the pandemic 

(annual percentage change) 

EU rental index, year-on-year growth

2.5

2.0

1.5

1.0

0.5

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

2019

2020

Source: SDW. 

On the supply side, RRE investment declined significantly in the first half of 2020 but 
recovered somewhat in the third quarter of 2020. While the size of the decline was similar to the 
one observed during the global financial crisis, it was steeper in the current crisis (Chart 1.7.C). 

Chart 1.7.C 

Real estate investment in the EU 

Housing investment fell significantly in H1 2020 

(real annual percentage change) 

Residential investments EU
Commercial real estate investment EU

10%

5%

0%

-5%

-10%

-15%

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Sources: SDW, Eurostat. 
Note: Last observation: Q3 2020. 

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Household indebtedness as a percentage of income is high in many EU countries and 
stands above 90% for the EU average (Chart 1.7.D). While data availability differs significantly 
across countries, this ratio is above the EU average in the six countries which had received ESRB 

recommendations, suggesting continued vulnerabilities. Most countries with high household 

indebtedness also have a high debt service-to-income ratio, which adds to their vulnerability. 

Chart 1.7.D 

Household debt-to-income ratio 
The household debt-to-income ratio was particularly high for countries which received 

recommendations on medium-term vulnerabilities in the RRE sector 

(percentage of real disposable income) 

Household debt, percentage of disposable income
EU average

250

200

150

100

50

0

DK NL SE LU CY FI

IE BE FR ES PT MT DE AT GR SK EE IT CZ PL HR SI BG LT HU LV RO

Sources: SDW, BCL, ESRB Secretariat calculations. 
Notes: Last observation is Q3 2020 for Austria, Belgium, the Czech Republic, Germany, Denmark, Spain, Finland, France, Italy, 
Luxembourg, the Netherlands, Portugal, Sweden and Slovenia; Q2 2020 for Ireland; Q1 2020 for Greece and Poland; Q4 2019 
for Cyprus, Romania, Slovakia, Estonia, Hungary, Lithuania and Latvia; Q4 2017 for Bulgaria; Q2 2017 for Malta; and Q4 2016 
for Croatia. Data on household disposable income for LU are available on an annual basis only up to 2018, and the quarterly 
values are BCL projections. 

Commercial real estate 

Compared with the fairly resilient RRE market, the COVID-19 crisis had a severe impact on 
the CRE market. Transactions in the CRE market fell by around 50% y-o-y in the last three 
quarters of 2020 (Chart 1.7.E) on the back of falling demand from both domestic and international 
investors, with the drop in foreign demand being more pronounced.45 Prime CRE prices declined 

especially for retail-related real estate in Q3 2020 (Chart 1.7.F). Moreover, the previously observed 

increase in prices for prime office space flattened somewhat. 

45   See also Financial Stability Review, ECB, November 2020. 

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Chart 1.7.E 

CRE transactions in the EU 

CRE transactions fell sharply as a result of the COVID-19 crisis 

(number of transactions) 

2018
2019
2020

2,000

1,800

1,600

1,400

1,200

1,000

800

600

400

200

0

Q1

Q2

Q3

Q4

Source: RCA. 
Notes: The EU sample includes all EU27 states. The data for Q4 2020 are preliminary, and the overall figures may rise once up-
to-date information is available. 

Chart 1.7.F 

CRE price indices in the EU 

CRE prices declined due to the pandemic 

(real index 2005 = 100) 

Prime commercial property (office)
Prime commercial property (retail)
Prime commercial property (overall)

250

200

150

100

50

0
2005

2006

2008

2009

2011

2012

2014

2015

2017

2018

2020

Sources: JLL, SDW. 
Note: Last observation: September 2020. 

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More forward-looking price indicators from financial markets suggest that the CRE market 
may decline further over an extended period. Real estate investment trust data suggest that all 
price indices in CRE sectors significantly declined at the beginning of the pandemic. While for 
industrial real estate (Chart 1.7.G) and for Germany46 they reverted to their previous level shortly 
afterwards, many countries and sectors continued to trade between 30% and 50% below their 

February levels. The impact of the COVID-19 crisis on both offices and retail property prices varied 

across countries (Chart 1.7.G right-hand side). The retail real estate sector may be more severely 

hit by long-term behavioural changes relating to a permanent increase in the market share of e-

commerce. Moreover, while a considerable number of staff will return to their offices in the wake of 

the pandemic, remote working arrangements will play a much bigger role in the future. This could 

result in a “K-shaped” recovery, with higher-quality properties that can adapt to health requirements 

being less impacted. Towards the end of 2020, the price indices were boosted by positive vaccine 

news, with the sectors most affected by the pandemic (i.e. retail and office) seeing the largest 

gains. 

Chart 1.7.G 

REIT price developments 

The pandemic had an uneven effect on CRE across countries and sectors 

(index 17, Feb 2020 = 100) 

Europe REIT aggregate
Min-max range
Median

Europe REIT aggregate
Europe REIT office
Europe REIT retail
Europe REIT residential
Europe REIT industrial

110

100

90

80

70

60

50

40

30

20

110

100

90

80

70

60

50

40

30

20

02/20

04/20

06/20

08/20

10/20

12/20

02/20

04/20

06/20

08/20

10/20

12/20

Source: Bloomberg. 
Notes: Last observation: 31 December 2020. The min-max range and median are based on a sample of countries which 
includes: Austria, Belgium, Finland, France, Germany, Ireland, Italy, the Netherlands, Spain and Sweden. The sample of 
countries was chosen based on data availability. The European aggregate index also includes European countries which are 
outside of the European Union. 

European real estate funds47 are predominantly investing in the European real estate 
market. In the third quarter of 202048, European real estate funds allocated almost 90% of their 
investments to Europe (Chart 1.7.H). Investors in European real estate funds are also 

46   While Germany is not shown in Chart 1.7.G, it is the only country in our sample whose REIT index reverted to its pre-

pandemic level as of end-December 2020.  

47   Based on AIFMD data. 

48   Data for the fourth quarter of 2020 are not yet complete, hence only the third quarter is reported here. 

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predominantly located in Europe. Insurance corporations and pension funds are the largest 

investors and held more than 40% of fund shares in Q3 2020 (Chart 1.7.I). These potential cross-

border linkages may increase correlation across European real estate markets and could act as a 

channel of contagion during severe market stress. 

Chart 1.7.H 

Geographical distribution of investments by real estate funds 

Europe accounts for the largest share of invested funds 

(NAV in EUR billions) 

EEA
Europe (other than EEA)
North America

Asia Pacific
Rest of the world

700

600

500

400

300

200

100

0

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

2017

2018

2019

Q3

Q2

2020

Sources: AIFMD, ESRB Secretariat calculations. 
Notes: The chart shows the regional breakdown of investment by real estate funds as reported under AIFMD. Funds domiciled 
in EEA. Last observation: Q3 2020. 

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Chart 1.7.I 

Real estate funds’ investor base 

Insurance corporations and pension funds are the largest investors 

(left-hand scale: NAV in EUR billions; right-hand scale: number of funds) 

Banks
General government
Households
Insurance corporations
Non-financial corporations

Other collateral investment undertakings
Other financial institutions
Pension plans/funds
None or unknown

800

700

600

500

400

300

200

100

0

2,500

2,000

1,500

1,000

500

0

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

2017

2018

2019

2020

Sources: AIFMD, ESRB Secretariat calculations. 
Notes: The chart shows the breakdown over time of the ownership of units in the alternative investment fund beneficially owned 
by each investor group. The red line shows the number of funds comprised in the data in each period. Funds domiciled in EEA. 
Last observation: Q3 2020. 

On average, real estate funds reported positive gross investment returns in 2020, even 
during the peak of the crisis. While European CRE market valuations declined, real estate funds 
yielded a cumulative return of nearly 7% over the first three quarters of 2020. Fund performance 

also decoupled from developments of real estate investment trusts (REITs), which experienced 

significant declines in market prices, especially in the first quarter of 2020 (Chart 1.7.J). In May, the 

ESRB issued a recommendation pertaining to valuation uncertainty in funds with significant 

exposures to real estate (for more information on the recommendation see Section 4.4).  

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Chart 1.7.J 

Real estate funds’ performance 

Fund performance decoupled from that of REITs 

(gross return) 

2017
2018

2019
2020

2.5%

2.0%

1.5%

1.0%

0.5%

0.0%

Jan.

Feb.

Mar.

Apr.

May

June

July

Aug.

Sep.

Oct.

Nov.

Dec.

Sources: AIFMD, ESRB Secretariat calculations. 
Notes: The chart shows monthly gross returns over time. Last observation: Q3 2020. 

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2 

General policies 

Following the outbreak of the COVID-19 pandemic, authorities took measures to ensure the 

resilience of the financial sector, strengthening its capacity to support the real economy and 
reducing the risk of failures of financial institutions. These measures comprised temporary 
capital and operational relief (see Section 2.1), allowing banks to operate temporarily below the 

level of capital defined by the Pillar 2 Guidance (P2G), the capital conservation buffer (CCoB) and 

the liquidity coverage ratio (LCR). Furthermore, authorities released cyclical and structural capital 

buffers of banks (see Section 3.3) and implemented measures targeted at non-bank financial 

intermediaries (see Section 4). As examples, weekly data on discount risk-free rates were 

published to monitor insurers’ solvency positions in a timely manner, and special support measures 

were incepted for trade credit insurance. In addition, EIOPA revised its timetable for the Solvency II 

2020 Review, and new transitional measures for capital relief for insurers were authorised in some 

countries. These measures were complemented with system-wide restraints on distributions 

(dividend payments, share buybacks and other pay-outs) aimed at preserving capital within the 

system, thereby increasing loss-absorbing capacity and maintaining stable lending levels (see 

Section 2.2). To assess the resilience of financial entities, authorities used stress tests that they 

adapted to the already stressed situation (see Section 2.3). 

2.1 

Operational and regulatory relief measures  

To dampen the impact of the COVID-19 pandemic on the financial sector, supervisory and 
regulatory authorities resorted to operational and regulatory relief measures. Supervisory 
and regulatory authorities recognised the difficult operating environment for supervised entities and 

took measures designed to help them through the pandemic. These measures comprised both 

operational and regulatory relief measures as well as other measures. Several of these measures 

had a macroprudential nature and are listed here. 

• 

Operational relief measures aimed at temporarily freeing up resources in supervised 
entities. For the banking sector, such measures included for instance (i) the postponement of 

the stress test to 2021 (see also Section 2.3), (ii) the rescheduling of the remittance date for 

supervisory reporting, (iii) the decision to take a pragmatic approach to the 2020 Supervisory 

Review and Evaluation Process (SREP), (iv) the postponement of the market risk 

standardised approach (FRTB-SA) reporting requirements under the CRR2 to September 

2021, and (v) the one-year deferral of the two final implementation phases of the margining 

requirements for non-centrally cleared derivatives. For the insurance sector, remittance 

deadlines for certain supervisory reporting (e.g. annual SFCR reports) were postponed, while 

updated information on the solvency capital requirement for improved monitoring was 
added.49 Also, Europe-wide data requests such as for the Holistic Impact Assessment for the 
Solvency II 2020 Review were postponed.50 Other examples of operational relief measures 

49   See Recommendations on Supervisory Flexibility Regarding the Deadline of Supervisory Reporting and Public 
Disclosure – Coronavirus/COVID-19, EIOPA, 20 March 2020; at the same time, insurers were asked to include an 
updated evaluation of their solvency position in the SFCR report for 2019. 

50   See EIOPA revises its timetable for advice on Solvency II Review until end December 2020, EIOPA, 30 April 2020. 

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were the temporary suspension of the requirement for physical board meetings in AT51 and 
the acceptance of electronic signatures in DE52. For the financial markets, the European 

Securities and Market Authority (ESMA) provided relief regarding a number of deadlines (e.g. 

consultations), including with regard to the Securities Financing Transaction Regulation, in 

order to address the effects of the COVID-19 pandemic and help market participants’ 

business continuity. 

• 

Regulatory relief measures aimed at temporarily relaxing regulatory standards to help 
regulated entities by deferring the impact of credit risk developments and mitigate the 

procyclicality of that impact. For banks, such measures directly complemented capital buffer 

releases and included (i) guidance on the criteria for classifying exposures as forborne or 
defaulted in the light of public and private payment moratoria53, (ii) the mitigation of the 
procyclical effect of the prudent valuation framework given the unprecedented market volatility 
during the COVD-19 pandemic54, and (iii) the frontloading of certain regulatory measures 
included in the CRR “quick fix” 55, such as the earlier implementation of the revised SME 
supporting factor. For the insurance sector, measures were incepted for trade credit 

insurance, as risk transfer to state guarantee schemes could, like reinsurance, be reflected in 
lower solvency capital requirements under certain conditions.56 Furthermore, new capital relief 
measures (transitional measures, volatility adjustment) were granted to specific insurers in DE 

and PT and also approved retroactively in DE as of 31 March 2020. For capital markets, relief 

was provided by publishing a regulatory technical standard (RTS) under the European Market 

Infrastructure Regulation (EMIR), providing for a one-year deferral of the two implementation 
phases for bilateral margining requirements57 and extending the consultation period for EMIR 

51  

Informationsschreiben COVID-19 Maßnahmen Versicherungs- und Pensionskassenaufsicht, Österreichische 
Finanzaufmarktaufsicht, 18 March 2020. 

52   COVID-19-Lage: Neue Entwicklungen und wichtige Informationen der BaFin, Bundesanstalt für 

Finanzdienstleistungsaufsicht, 1 March 2021. 

53   The EBA guidelines on legislative and non-legislative loan repayment moratoria published on 2 April 2020 detailed 
the criteria to be fulfilled by legislative and non-legislative moratoria on loan repayments applied in the light of the COVID-
19 crisis. They aimed to ensure that banks, while maintaining comparable metrics, would be able to grant payment holidays 
to customers avoiding the automatic classification of exposures under the definition of forbearance or as defaulted under 
distressed restructuring. Since the expiration of the EBA guidelines on 30 September 2020, banks returned to the practice 
that any rescheduling of loans should follow a case-by-case approach according to the usual prudential framework. On 2 
December 2020, in response to the second wave of the COVID-19 pandemic, the EBA reactivated the guidelines until 
end-March 2021. 

54  The EBA regulatory technical standards published on 25 June 2020 in the Official Journal adjust the calibration of 

the prudent valuation of banks’ fair-valued financial instruments. They aim at mitigating the excessive procyclical impact of 
the unprecedented market volatility in the light of the COVID-19 pandemic on aggregated fair-valued financial instruments. 
The application of the increased aggregation factor expired on 31 December 2020. 

55   Regulation (EU) 2020/873 of the European Parliament and of the Council of 24 June 2020 amending Regulations (EU) No 
575/2013 and (EU) 2019/876 as regards certain adjustments in response to the COVID-19 pandemic (CRR “quick fix”) was 
published in the Official Journal on 26 June 2020. The CRR “quick fix” is part of a series of measures taken by European 
institutions to mitigate the impact of the COVID-19 pandemic on banks across the Member States. In addition to the 
flexibility already provided in the existing rules, the CRR “quick fix” introduces certain adjustments to the CRR, including 
temporary measures intended to enhance credit flows to companies and households, thereby supporting the EU’s 
economy. 

56   See Supervisory Statement on the Solvency II Recognition of Schemes based on Reinsurance with Regard to 

COVID-19 and Credit Insurance, EIOPA, 20 July 2020.  

57  

In response to the COVID-19 outbreak, the European Supervisory Authorities (EBA, EIOPA and ESMA – ESAs) published 
joint draft RTSs to amend the Delegated Regulation on the risk mitigation techniques for non-centrally cleared OTC 
derivatives (bilateral margining) under EMIR and incorporate a one-year deferral of the two implementation phases of the 
bilateral margining requirements. See the corresponding press release. 

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reporting requirements.58 Additional measures were taken in the form of a coordinated 
supervisory risk-based approach for periodic fund management reporting and the 

postponement by one year of the entry into force of the open access provisions regarding 

exchange-traded derivatives under the Markets in Financial Instruments Regulation (MiFIR) 

until 3 July 2021.  

• 

Other measures for banks included (i) the two-year extension of transitional arrangements on 
IFRS 9 so that the capital impact of additional provisions recognised under IFRS 9 would be 
minimised59, and (ii) the one-year deferral of the implementation date of Basel III standards to 
1 January 2023. On the non-banking side, ESMA issued a statement to promote coordinated 

action by national competent authorities (NCAs) regarding the auditing of benchmark 

providers and supervised contributors and encouraging them not to prioritise supervisory 

actions against these parties relating to the timeliness of fulfilling said audit requirements. In 

addition, ESMA published statements relating to corporate disclosure issues, reflecting the 

effects of COVID-19 in financial statements and addressing difficulties encountered by issuers 

in meeting specific financial reporting deadlines. Finally, for credit rating agencies (CRAs), 

ESMA focused its supervisory engagement on business continuity and adherence to key 

requirements of the CRA Regulation, as well as closely monitoring CRAs’ rating actions 

through enhanced data analytics and assessing their possible impact on financial stability. 

2.2 
buybacks and other pay-outs 

System-wide restraints on dividend payments, share 

A number of European and national authorities took action to encourage financial 

institutions under their remit to refrain from discretionary pay-outs (e.g. dividends, bonuses 
and share buybacks aimed at remunerating shareholders). At EU level, the EBA issued a 
statement on 12 March 2020 on actions to mitigate the impact of COVID-19 on the EU banking 

sector, emphasising the need for banks to follow prudent dividend and other distribution policies, 
including variable remuneration.60 On 31 March 2020, the EBA issued a second statement urging 

banks “to refrain from dividend distribution or share buybacks which result in a capital distribution 
outside the banking system, in order to maintain its robust capitalisation”.61 On 17 March 2020, 

EIOPA also issued a statement urging (re)insurers to take measures to preserve their capital 

position in balance with the protection of the insured and pursue prudent dividend and other 

58  

In view of the effects of the ongoing COVID-19 pandemic on stakeholders and market participants, ESMA decided to 
extend the response date for the consultation on the technical standards on reporting, data quality, data access and 
registration of trade repositories under EMIR Refit to 3 July 2020. 

59   Following the application of IFRS 9, a sudden significant increase in expected credit losses (ECLs) under the COVID-19 

pandemic scenario would have had a direct impact on capital levels and, for that reason, it was commonly accepted in the 
international regulatory community that some flexibility should be allowed during these exceptional and unprecedented 
circumstances. In April 2020, the Basel Committee on Banking Supervision (BCBS) decided to introduce some changes as 
regards the application of IFRS 9 transitional arrangements by allowing an extension of the transitional period and a higher 
percentage of ECLs that could be added back to CET1, neutralising their negative impact on regulatory capital. As part of 
the European response to the COVID-19 pandemic and in order to limit the possible volatility in the regulatory capital, some 
amendments were also introduced to Regulation (EU) No 575/2013 (the CRR “quick fix”). 

60    See EBA statement on actions to mitigate the impact of COVID-19 on the EU banking sector, EBA, 12 March 2020.  
61   See EBA statement on dividends distribution, share buy backs and variable remuneration, EBA, 31 March 2020.  

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distribution policies, including variable remuneration.62 On 2 April 2020, in a follow-up to a request 
for prudent distribution policies, EIOPA updated its communication and urged (re)insurers to 

temporarily suspend all discretionary dividend distributions and share buybacks aimed at 
remunerating shareholders.63 

On 27 March 2020, the ECB recommended64 that, at least until 1 October 202065, no dividends 
should be paid out and no irrevocable commitments to pay out dividends should be undertaken by 

credit institutions for the financial years 2019 and 2020, and that credit institutions should refrain 

from share buybacks aimed at remunerating shareholders. This recommendation was addressed to 

significant institutions (SIs) directly supervised by the ECB and to NCAs with regard to less 

significant institutions. In addition, some national authorities implemented similar restrictions in their 
respective jurisdictions.66 

In support of these initiatives and to strengthen the case for a uniform approach across the 

EU and across different segments of the financial sector, the ESRB issued a 
recommendation on restrictions of distribution (see Box 2). It asked relevant authorities to 
request financial institutions under their supervisory remit to refrain, at least until 1 January 2021, 

from distributing dividends or irrevocably committing to distribute dividends, from buying back 

ordinary shares and from creating an obligation to pay variable remuneration to material risk-takers.  

Relevant national authorities and the ECB urged the entities under their supervisory remit to 

withhold distributions, to refrain from buying back ordinary shares and to apply prudent and 
sustainable variable remuneration policies and practices until 1 January 2021.67 These 
requests were issued mainly in the course of the second and third quarters of 2020, addressed 

banks, investment firms, (re)insurance companies and central counterparties (CCPs), and took 

either a legally binding or non-binding form.  

As a result, banks’ and non-banks’ distributions in 2020 were lower than originally 
planned.68 In response to the supervisory requests, the vast majority of banks refrained from 
making dividend pay-outs, resulting in a very limited number of distributions during 2020 in the 

62   See EIOPA statement on actions to mitigate the impact of Coronavirus/COVID-19 on the EU insurance sector, 

EIOPA, 17 March 2020. 

63  See EIOPA statement on dividends distribution and variable remuneration policies in the context of COVID-19, 

EIOPA, 2 April 2020.  

64   Recommendation of the European Central Bank of 27 March 2020 on dividend distributions during the COVID-19 

pandemic and repealing Recommendation ECB/2020/1 (ECB/2020/19).  

65   The ECB amended Recommendation ECB/2020/19 on 27 July 2020 (ECB/2020/35), extending pay-out restrictions until 

January 2021 and clarifying the timeline to restore buffers.  

66   On 30 March 2020, the Bundesanstalt für Finanzdienstleistungsaufsicht communicated to financial institutions its 
strong expectation not to distribute dividends, although not imposing a blanket approach but rather a case-by-case 
procedure to safeguard the equity capital base of supervised firms. On 19 March 2020, Българска народна банка 
(Bulgarian National Bank) implemented a set of measures aimed at preserving the stability of the banking system and 
strengthening its flexibility to reduce the adverse effects on households and companies from the restrictions caused by the 
COVID-19 pandemic. Those measures encompassed retaining year-end 2019 profit for all banks, including a ban on the 
redistribution of profit accumulated during previous years. According to this decision, credit institutions were not permitted 
to distribute profits for 2019, in whole or in part, in the form of dividends or other similar payments. 

67   The ESRB is currently in the process of assessing the compliance with Recommendation ESRB/2020/7 and aims at 

publishing its findings in the course of 2021. In addition, the ESRB Secretariat regularly monitors the effectiveness of the 
measures taken by relevant authorities in response to its recommendation. 

68   The ESRB gathered information on the effectiveness of the measures by conducting surveys among its member 

institutions. The information provided in this section is only partial and provisional, since official information was not 
available by the publication date of this report.  

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banking sector. In the non-banking sector, insurance and reinsurance companies as well as CCPs 

constrained their pay-outs to a lesser extent than the banking sector, but here too the overall level 

of distributions was low.  

In the light of the ongoing COVID-19 crisis, the European and national authorities (including 

the ESRB) decided to prolong the measures in place or to issue new statements to cover the 
planned distributions for 2021. On 15 December 2020, the ECB recommended that significant 
supervised groups and significant supervised entities exercise extreme prudence with respect to 

pay-outs, specifying that it was generally considered not prudent to engage in distributions and 

share buybacks amounting to more than 15% of their accumulated profit for the financial years 
2019 and 2020, or more than 20 basis points in terms of their CET 1 ratio, whichever was lower.69 

On the same date, the ESRB amended its recommendation (see Box 2) and asked relevant 

authorities to request that financial institutions refrain from making any distributions unless they 

applied extreme caution and, in any event, to not exceed the conservative threshold set by their 
competent authority. Also on 15 December, the EBA issued a statement70 calling banks to continue 
applying conservative distribution policies and to carefully take into account the resulting impact of 

dividends or other distributions on their capital trajectory. As regards the insurance sector, EIOPA 

stated on 18 December 2020 that any dividend distributions, share buybacks or variable 

remuneration should not exceed the thresholds of prudency and that institutions should ensure the 

resulting reduction in the quantity or quality of their own funds remained at levels appropriate to the 
current levels of risk.71 

The implemented measures remain largely effective. Few banks have informed relevant 
authorities of an intention to disregard their requests for restraint on distributions, at least during the 

first and second quarter of 2021. Most Competent Authorities engaged in supervisory dialogue with 

individual institutions to assess their intention to proceed with some limited distributions. As regards 

the insurance sector, the vast majority of NCAs were informed about the intention of insurers (life 

and non-life) to proceed with some limited pay-outs (especially in February 2021 for the accounting 

year 2019). 

Box 2   
ESRB recommendation on restriction of distributions 

The ESRB fully supported the initiatives of its member institutions and recommended 

restriction of distributions to ensure that financial institutions maintained sufficient levels of 

capital and loss-absorbing capacity to mitigate the impact of the crisis and contribute to 
recovery. Recommendation ESRB/2020/7 on restriction of distributions during the COVID-19 
pandemic72 asked relevant authorities to request financial institutions under their supervisory remit 
to refrain, at least until 1 January 2021, from any actions which had the effect of reducing the 

69   Recommendation of the European Central Bank of 15 December 2020 on dividend distributions during the COVID-

19 pandemic and repealing Recommendation ECB/2020/35 (ECB/2020/62). 

70   The EBA continues to call on banks to apply a conservative approach on dividends and other distributions in light 

of the COVID-19 pandemic, EBA, 15 December 2020.  

71   EIOPA outlines key financial stability risks and vulnerabilities for insurance and pension sector and recommends 

that any dividend distributions should not exceed thresholds of prudency, EIOPA, 18 December 2020.  

72   Recommendation of the European Systemic Risk Board of 27 May 2020 on restriction of distributions during the 

COVID-19 pandemic (ESRB/2020/7). 

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quantity or quality of their own funds at EU group level (or at individual level where the financial 

institution was not part of an EU group), and, where appropriate, at sub-consolidated or individual 

level. These included dividend distributions or irrevocable commitments to make a dividend 

distribution, buybacks of ordinary shares and the creation of an obligation to pay variable 

remuneration to a material risk-taker. The recommendation covered banks, certain investment 

firms, insurers, reinsurers and central counterparties and took into account the critical role these 

sectors of the financial system play for the real economy, in particular during crises.  

Recommendation ESRB/2020/7 originally covered the period until 1 January 2021, but 

continuing uncertainty and short-term risks to the recovery from the crisis in the fourth 
quarter of 2020 made it necessary to consider its extension. Markets and authorities still lacked 
information on the long-term impact of the crisis on the financial sector and credit markets. 

Notwithstanding the continuation of unprecedented policy support measures, many businesses 

were confronted with impaired cash flows, weak earnings and rising indebtedness. Given this 

context, the ESRB considered that an exceptional extension of pay-out restrictions to account for 

uncertainty about the future macroeconomic development was necessary to maintain a sufficiently 

high level of capital in financial institutions to mitigate systemic risk and contribute to economic 

recovery.  

Hence, on 15 December 2020, the ESRB General Board adopted Recommendation 
ESRB/2020/15 amending Recommendation ESRB/2020/7.73 According to the revised 
recommendation, relevant authorities are recommended to request banks, investment firms, 
insurance companies and reinsurance companies74 to refrain, until 30 September 2021, from 
distributions which have the effect of reducing the quantity or quality of own funds, unless these 

financial institutions apply extreme caution in carrying out distributions and the resulting reduction 

does not exceed the conservative threshold set by their competent authority. The revised 

recommendation is in line with the decisions taken in parallel by the EBA, EIOPA and ECB. 

Previously, the General Board also included CCPs within the scope of its recommendation. 

However, the stress test exercise regarding CCPs in the EU conducted by ESMA confirmed the 

overall operational resilience of EU CCPs to common shocks and multiple defaults for credit, 

liquidity and concentration stress risks. Considering the effectiveness of the measures deployed by 

CCPs to mitigate operational risk, the General Board decided that it was no longer necessary to 

include CCPs within the scope of the recommendation.  

At the same time, Recommendation ESRB/2020/15 recognises the importance of 
distributions in enabling financial institutions to raise capital externally. Given that the 
prospect of available COVID-19 vaccines has reduced the probability of more severe scenarios and 

considering the progress made by authorities and financial institutions in dealing with the effects of 

the pandemic, the revised recommendation allows some limited distributions under specific 

circumstances. Financial institutions may proceed with distributions of dividends and buybacks of 

ordinary shares provided that (i) they engage in discussion with their competent authority, (ii) they 

73   Recommendation of the European Systemic Risk Board of 15 December 2020 amending Recommendation 

ESRB/2020/7 on restriction of distributions during the COVID-19 pandemic (ESRB/2020/15).  

74  The effectiveness of the measures deployed by CCPs to mitigate operational risk showed the overall resilience of this 

sector to common shocks and multiple defaults for credit, liquidity and concentration stress risks. This evidence suggested 
that it was no longer necessary to include CCPs within the scope of the recommendation. 

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apply extreme caution so that they do not put the stability of the financial system and the recovery 

process at risk, and (iii) the resulting reduction does not exceed the conservative threshold set by 

their competent authority. The competent authorities are asked to calibrate the conservative 

threshold paying due regard to: the need for financial institutions to maintain a sufficiently high level 

of capital, also taking into account the risks of a deterioration in the solvency position of 

corporations and households in view of the pandemic; the need to ensure that the overall level of 

distributions of financial institutions under their supervisory remit is significantly lower than in the 

recent years prior to the COVID-19 crisis; and the specificities of each sector within their remit. The 

recommendation also includes forward guidance which stresses the temporary nature of these 

restrictions and the commitment of the General Board to decide, before the expiry of the 

recommendation, whether the recommendation should be amended, considering, inter alia, 

macroeconomic developments and available information. 

2.3 
COVID-19 crisis  

The use of stress tests and scenario tools in the 

The EBA, EIOPA and ESMA are requested by legislation to initiate EU-wide stress tests in 
their areas of competence in cooperation with the ESRB. As part of this cooperation, the ESRB 
designs scenarios of adverse economic and financial market developments for these stress tests. 

These tests are designed to assess the resilience of financial institutions or market participants to 

adverse developments. 

Stress tests and scenario analyses informed policy during the COVID-19 pandemic. Stress 
tests and scenario analyses are key analytical and policy tools during both benign and stressful 

periods. During “normal” or benign times, an important focus of stress tests and scenario analyses 

is on uncovering underlying vulnerabilities that may be building up. In contrast, during periods when 

stress is materialising, a key contribution of stress tests and scenario analyses is to provide an 

assessment of how well financial institutions will be able to absorb the stress and to provide 

reassurance that they will remain resilient in the event of a further deterioration of fundamentals. 

During the period under review, the market turmoil at the onset of the COVID-19 pandemic put 

many financial institutions under actual stress. To allow banks to focus on the continuity of their 
core operations, the EBA postponed its 2020 banking sector stress test.75 To inform policy, 
authorities instead focused on scenario analyses that could be performed with top-down models at 

a higher level of aggregation and without requiring the same level of close interaction with individual 

financial institutions. Using novel analytical tools, the ESRB contributed to this assessment by 

coordinating a cross-sectoral analysis that sought to quantify the potential impact of large-scale 

corporate bond downgrades on the insurance, pension fund, investment fund and banking sectors 

(see Box 3). Moreover, the ECB conducted a COVID-19 vulnerability exercise of the euro area 

banking sector (described below).  

75   This postponement was part of a suite of relief measures, helping banks to focus on their core operations. See EBA 
statement on actions to mitigate the impact of COVID-19 on the EU banking sector, EBA, 12 March 2020.  

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The ECB Banking Supervision’s COVID-19 vulnerability analysis during the summer of 2020 
found that, overall, the banking system would be resilient to the pandemic-induced stress.76 
The vulnerability analysis assessed how the economic shock caused by the COVID-19 outbreak 

might impact 86 euro area banks and aimed to identify potential vulnerabilities within the banking 

sector over a three-year horizon. To do so, the exercise focused on a central and a severe 

scenario, as set out in the June 2020 ECB staff macroeconomic projections, which both included, to 

a large extent, the supervisory, monetary and fiscal support measures taken in response to the 

pandemic. Compared with the more likely central scenario, the severe scenario represented a more 

adverse but still plausible development of the crisis. It assumed that real GDP would decline by 

12.6% in 2020 and grow by 3.3% and 3.8% in 2021 and 2022, respectively. In that scenario, CET1 

capital was estimated to drop by 5.7 percentage points from 14.5% to 8.8%. While several banks 

would have needed to take action to maintain compliance with minimum capital requirements under 

the severe scenario, overall the results showed that the euro area banking sector would be able to 

withstand the pandemic-induced stress.  

ESMA updated its 2020 stress test guidelines for MMFs to better reflect certain risk factors 
the ESRB had recalibrated in the light of the market turmoil in March. In addition to informing 
policy during the COVID-19 pandemic, the market volatility and liquidity stress experienced by 

financial institutions during the peak of the pandemic-induced market turmoil also pointed to areas 

where stress tests could be enhanced, thereby informing the design of future exercises. For 

example, during the market turmoil in March, several categories of investment funds, including 

MMFs, faced large-scale investor redemptions, while the assets in which they had invested turned 

illiquid (see Section 4.4). Most of the market moves during March 2020 were less severe than those 

prescribed by the 2019 MMF stress test guidelines. However, to better reflect liquidity risks and to 

ensure that the revised scenario would be more severe than the market moves during March 2020 
for all risk factors, the ESRB provided ESMA with a recalibrated set of risk factors.77 ESMA 
incorporated them in its annual update of its MMF stress testing guidelines for 2020.78 

ESMA’s CCP stress test showed that CCPs were resilient to a range of risk types, with 
further improvements to CCPs’ own liquidity stress testing recommended by the ESRB. 
During the market disruption of March 2020, initial margins posted to EU and UK CCPs increased 
by approximately one-third, and variation margin calls also increased sharply (see Section 4.2).79 
ESMA’s third CCP stress test, for which the ESRB had provided an adverse scenario in 2019, 

considered credit, liquidity and concentration risks, and included reverse credit stresses. While 
ESMA’s exercise found CCPs to be resilient against these types of risk overall,80 the ESRB 
deemed that – based on its analysis of margin calls during the height of the market turmoil in March 

– it was important for CCPs to capture comprehensively in their own liquidity stress testing any 

events that could lead to them experiencing a liquidity shortfall. Reflecting this, the ESRB’s 

recommendation on liquidity risks arising from margin calls issued in June 2020 stated that the 
EMIR technical standards81 relating to the liquidity risk controls at CCPs could be enhanced by 

76   See ECB press release on COVID-19 vulnerability analysis, ECB, 28 July 2020.  
77   See Adverse scenario for ESMA’s money market fund stress-testing guidelines in 2020, ESRB, September 2020.  
78   See Guidelines on stress test scenarios under the MMF Regulation, ESMA, December 2020. 
79   See Chart 1 in Liquidity risks arising from margin calls, ESRB, June 2020.  
80   See ESMA's third EU-wide CCP stress test finds system resilient to shocks, ESMA, 13 March 2020.  
81   Developed under Article 44 of the European Market Infrastructure Regulation (EMIR Regulation EU No 648/2012).  

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requiring CCPs to stress test their liquidity risk against the default of any two entities that provide 

services to the CCP and whose default could materially affect the liquidity position of the CCP. This 

would incentivise CCPs to improve the management of their reliance on liquidity service providers. 

Box 3   
A system-wide scenario analysis of large-scale corporate bond 
downgrades 

The ESRB conducted a system-wide scenario analysis of large-scale corporate bond 
downgrades. The COVID-19 pandemic inflicted an unprecedented shock on the economy, leading 
to a deterioration of the profitability and credit rating of many non-financial companies. Bonds that 

cross the threshold from “investment grade” to “high-yield” are commonly called “fallen angels”. The 

ESRB conducted a system-wide simulation exercise in order to better understand the potential 

impact of forced sales (“fire sales”) of fallen angels by constrained institutions (e.g. passive 

investment funds tracking an investment grade index). Using granular security-level holdings of 

corporate bonds, the analysis first mapped out significant portfolio overlaps, i.e. sectors in various 

countries that have similar corporate bond portfolios. Chart 2.3.A illustrates the European corporate 

bond portfolio overlap network between the pension fund (yellow, top right-hand corner), the 

banking (blue, bottom right-hand corner), the investment fund (light green, bottom left-hand corner) 

and the insurance (dark green, top left-hand corner) sectors. The width of the edges quantifies the 

degree of portfolio similarity, with the ten largest links highlighted in orange. If one of these sectors 

were to engage in a distressed sale that moved market prices, mark-to-market losses would be 

suffered by other sectors that are proportional to the degree of overlap between them.  

Chart 2.3.A 

The European cross-sectoral portfolio overlap network 

The top-down exercise showed that the impact of a large volume of sales of fallen angels 
could be significant but would – in isolation – not generate financial instability. Overall, the 

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analysis revealed that in a severe mass downgrade scenario with a corresponding yield shock, 

initial losses from repricing could amount to between €150 billion and €200 billion across the entire 

financial system, and that fire sale losses stemming from distressed market reactions might add 

another 20% to 30% to these losses, depending on how much of their holdings institutions would 

sell and how liquid markets would turn out to be. The results of such a simulation exercise are, by 

their very design, imbued with uncertainty. To account for this uncertainty, the ESRB combined (i) a 

range of behavioural scenarios for the various institutional sectors, (ii) an upper and a lower bound 

for the market impact caused by a fire sale, and (iii) two scenarios of increasingly large numbers of 

fallen angels. The combination of these three factors led to 12 scenarios being analysed; these are 

summarised in Table 2.3.A.  

Table 2.3.A 

Initial losses from downgrades (in all rating categories), volume of fallen angels, volume of 

sales and lower and upper bounds for losses resulting from fire sales 

(EUR billions) 

Mild behavioural 
assumption 

Severe 
behavioural 
assumption 

Extreme 
behavioural 
assumption 

Scenario 1 

Scenario 2 

Initial 
losses 

Fallen 
angels 

Volume 
of sales 

Lower 
bound 
fire sales 

Upper 
bound 
fire sales 

Initial 
losses 

Fallen 
angels 

Volume 
of sales 

Lower 
bound 
fire sales 

Upper 
bound 
fire sales 

145.9 

231.8 

30.3 

1.7 

18.0 

212.7 

443.1 

64.6 

3.3 

33.0 

145.9 

231.8 

68.6 

4.0 

36.9 

212.7 

443.1 

135.2 

7.3 

58.7 

145.9 

231.8 

198.1 

9.8 

64.1 

212.7 

443.1 

373.1 

15.7 

84.6 

Sources: ESAs, Bank of England and ESRB Secretariat calculations. 

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Risks faced by banks and policies to 

3 
mitigate them 

3.1 

Introduction 

The main economic impact of the COVID-19 pandemic on the EU banking sector has not yet 
materialised. The initial impact of the COVID-19 pandemic on the financial system was 
predominantly on financial markets, with large falls in asset prices and stresses in some markets 

observed during March 2020 (see Section 1). In contrast, the main economic impact on the EU 

banking system is yet to materialise as the collapse in economic activity takes time to manifest itself 

in rising unemployment, corporate insolvencies, NPLs and – ultimately – losses that affect banks’ 

capital positions. 

The EU banking sector entered the COVID-19 pandemic in a more resilient state compared 
with the global financial crisis, notably thanks to regulatory and supervisory reforms. At 
16.8% at end-2019 compared with 8.1% in June 2007, Tier 1 capital ratios were higher, and the 
loss absorption quality of capital had increased given the increase in CET1 capital.82 Asset quality 
had also improved. By end-2019, NPL ratio had fallen to 2.7%, more than halving over the previous 
five years.83 Banks also entered the COVID-19 pandemic in a better liquidity position, in part thanks 

to the implementation of the LCR requirement. By Q4 2019, the LCR reached on average nearly 
150%, having risen consistently in previous years.84 In addition, the banking sector was more 

capable of managing NPLs, while the creation of the Single Supervisory Mechanism (SSM) and the 

Single Resolution Mechanism (SRM) made for a more robust institutional framework that supported 

a coordinated microprudential response across Member States participating in the banking union, 

complemented by macroprudential policy action taken at national level. 

The initial response by the ESRB and its members was designed to avert a credit crunch. In 
addition to the provision of critical functions such as payment and settlement services, an important 

aspect from a macroprudential perspective was that banks meet the demand for credit throughout 

the cycle, so that a recession was not amplified by a credit crunch. Reflecting this, at the onset of 

the pandemic, public authorities in Europe, including member institutions of the ESRB, reduced 

capital buffers (Section 3.3) and operational burdens, for example by easing reporting requirements 

and by postponing the banking sector stress test (Section 2.3). Although some of these measures 

were microprudential in nature and/or focused on the use of microprudential tools, they are 

nevertheless covered in this section of the review because of their macroprudential implications.  

In the course of 2020, this initial response was complemented with work designed to ensure 
that banks could finance the recovery. The banking system plays a critical role in a recovery 
phase, reallocating resources from unviable firms and sectors to viable and growing firms and 

sectors. Whether or not the banking sector will play this role depends on: (i) its soundness, so that 

banks are able to serve the real economy; (ii) the private objectives of banks, notably in terms of 

82   See EBA Risk Dashboard Q4 2020, EBA Risk Dashboard Q4 2019 (with CET1 ratio data being displayed on p. 8) and 

EU Banking Sector Stability, ECB, November 2007. Data refer to the Tier 1 ratio. 

83   EBA Risk Dashboard Q4 2019, p. 3. 
84   See EBA Risk Dashboard Q1 2020. 

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external rating and profitability; and (iii) the flexibility, sufficiency and efficacy of the prudential 

framework, so that it does not disincentivise banks from meeting the demand for credit and from 

undertaking other critical functions in spite of deteriorating capital ratios. Reflecting this, the ESRB 

considered whether measures could be introduced that would help facilitate banks financing the 

recovery. These included the use and availability of capital buffers and the macroprudential toolkit 

more broadly; the working of corporate insolvency procedures; the functioning of the recovery and 

resolution framework; and dealing with NPLs, including via risk transfer to other parts of the private 

sector where these risks can be better absorbed. 

3.2 

Risks and vulnerabilities in banks  

Assessing risks and vulnerabilities in the banking sector is subject to significant caveats in 
the current circumstances. Due to the COVID-19 crisis, the analysis of asset quality of banks’ 
balance sheets is less straightforward, creating challenges for the assessment of risks and 
vulnerabilities.85 The informative content has also been reduced due to temporary exemptions 
owing to the extraordinary magnitude of the shock.86 The implications of this reduced flow of 
information about financial intermediation may differ depending on whether the COVID-19 shock on 

the economy is temporary or long-lasting. If the economy is subject to a massive yet temporary 

shock, a lack of updated information may be beneficial for financial stability (smoothing of 

procyclicality and prevention of abrupt deleveraging). However, if the shock ends up having a long-

lasting impact, the periodical dissemination of additional aggregate statistics on the banking sector 

may be useful in reducing the large degree of uncertainty surrounding their balance sheets. The 

lack of appropriate information may lead to spillover effects to other intermediaries in the case of 
distress at one bank.87 The absence of accurate information on borrower risk may lead to 

uncertainty over the soundness of financial institutions. Non-banks might also be affected owing to 

direct exposures to the financial sector.  

3.2.1 
loans 

Trends and composition of banks’ assets with a focus on bank 

Banks continued to lend to the real economy throughout the COVID-19 crisis, and their 
composition of assets remained broadly stable. In December 2019, bank loans accounted for 
63.9% of EU banks’ total assets (see Chart 3.2.A). By June 2020, this share had only slightly 

85   See Financial stability implications of support measures to protect the real economy from the COVID-19 pandemic, 

ESRB, February 2021.  

86  

In particular, the prudential rules for recognising forborne and defaulted exposures have been temporarily adapted. 
European regulators and supervisors have advised banks to make use of the flexibility provided by standards and take a 
long-term view in assessing which creditors are in a good position to recover from the crisis. Furthermore, for loans under 
moratoria deemed eligible under the EBA guidelines on moratoria, classification as forborne or defaulted based on the 90-
days-past-due criterion is not automatic. The EBA has reactivated the extraordinary prudential treatment of loans under 
moratoria, recognising the exceptional circumstances of the second wave of COVID-19. Revised EBA guidelines which will 
apply until 31 March 2021 include additional safeguards against the risk of an undue increase in unrecognised losses on 
banks’ balance sheets. Banks have also always been required to assess the unlikely-to-pay criterion when classifying 
exposures as non-performing. 

87   See, for example, “The COVID-19 pandemic and the opacity of firms’ and banks’ balance sheets”, COVID-19 Note, 
Banca d’Italia, 15 June 2020; and Clerc, L., Giovannini, A., Peltonen, T., Langfield, S., Portes, R. and Scheicher, M., 
“Indirect contagion: the policy problem”, Occasional Paper Series, No 9, ESRB, January 2016. 

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declined to 62% and reached 60.48% at the end of the year. As of March 2020, at the onset of the 

COVID crisis, credit activity had substantially exceeded the 2019 average for NFCs, with lending 

growth rates slowing down in the third and fourth quarters, while it stayed rather stable for 

households (see Chart 3.2.B and Chart 3.2.C).  

Chart 3.2.A 

EU bank assets as a percentage of total assets 
Loans as a percentage of total assets remained stable throughout the COVID-19 crisis 

(percentage points) 

December 2019
June 2020
December 2020

70%

60%

50%

40%

30%

20%

10%

0%

Cash balances

Equity instruments

Debt securities

Loans and advances

Derivatives

Other assets

Source: EBA Risk Dashboard, fourth quarter. 

Chart 3.2.B 

New business loans to NFCs 

In most countries, new NFC lending increased in Q2 2020 beyond the 2019 average to satisfy 

emergency liquidity needs 

(index average 2019 = 100) 

January 2020
February 2020
March 2020

April 2020
May 2020
June 2020

300

250

200

150

100

50

0

AT BE CY DE EE ES

FI

FR

IE

IT

LT

LU NL PT

SI

SK BG CZ DK HR HU PL RO SE

Source: ECB MFI interest rate statistics. 

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Chart 3.2.C 

New loans to households 

Lending to households remained stable at the onset of the pandemic for most countries, with few 

exceptions 

(index average 2019 = 100) 

January 2020
February 2020
March 2020

April 2020
May 2020
June 2020

300

250

200

150

100

50

0

AT

BE CY DE

EE

ES

FR

IE

IT

LT

LU NL

PT

SI

SK BG CZ DK HR HU PL RO SE

Source: ECB MFI interest rate statistics. 

This continued lending was supported by unprecedented public support measures that 
attenuated the negative impact of the COVID-19 crisis on the real economy and households. 
As described in Section 1.3, swift and large-scale public support notably in the form of debt service 

moratoria and public loan guarantees supported the real economy households, preventing the crisis 

from morphing into a financial crisis. The share of loans and advances under moratoria as well as 

the share of new loans subject to use of public guarantees were heterogeneous across countries 

(see Chart 3.2.D and Chart 3.2.E). Banks in CY, PT, HU and HR had the highest share of loans 

and advances under moratoria, while banks in ES, PT, IT and RO had the highest percentage of 

loans issued under the public guarantee scheme. 

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Chart 3.2.D 

Loans and advances under moratoria by sector (September 2020) 
The adoption of moratoria measures across countries was heterogeneous, with banks in CY, PT, 

HU and HR relying the most on such measures 

(percentage of total loans and advances to the household and NFC sectors) 

Households
Non-financial corporations – SMEs
Non-financial corporations – other than SMEs

70%

60%

50%

40%

30%

20%

10%

0%

CY PT HU HR IT PL GR SI

IS FR MT RO BG SK AT IE NL EE BE LU LV LT ES FI DE SE CZ DK GB NO

Sources: EBA data, ESRB calculations. 

Chart 3.2.E 

New loans subject to public guarantees by sector (September 2020) 
The adoption of public guarantee schemes was heterogeneous across countries, with banks in ES, 

PT, IT and RO relying the most on such schemes 

(percentage of total loans and advances to the household and NFC sectors) 

Households
Non-financial corporations – SMEs
Non-financial corporations – other than SMEs

16%

14%

12%

10%

8%

6%

4%

2%

0%

ES PT IT RO FR GR PL MT SK AT HU SI DE DK IS FI BE IE NL EE BG HR LU LT LV SE CY CZ GB NO

Sources: EBA data, ESRB calculations. 

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3.2.2 

Rising credit risk, provisioning and loss recognition 

The COVID-19 crisis is due to affect the financial soundness of households and NFCs and 
thereby adversely affect the banking system through an increase in credit risk.88 While the 
impact of the unprecedented (peacetime) economic contraction has so far been contained by public 

policy measures (see Section 1.3), there is high uncertainty regarding future developments, and 

financial stress in households and NFCs is expected to materialise over time. This will potentially 

lead to a substantial increase in the number of firms in distress (see Section 1.4). 

The increase in credit risk has not yet been reflected in the risk weights of banks’ assets, 

which can mostly be attributed to fiscal support measures and regulatory changes (CRR 
“quick fix”89). Loan guarantees are considered as a risk mitigant in the computation of risk-
weighted amounts for the calculation of capital requirements for credit risk. Together with the 

revision of the SME supporting factor in the CRR “quick fix”, they lead to lower risk-weighted 

amounts for the credit exposures of banks, indirectly providing capital relief to banks. Looking at the 

change in original exposures and risk-weighted amounts for the main exposure types (see Chart 

3.2.F), the increase in original exposures to SMEs was not replicated by a similar increase in risk-

weighted amounts, as was the case for the other main exposure types. On the contrary, exposures 

to SMEs rose while risk-weighted amounts declined. This can be explained by the revision of the 

SME supporting factor and by the fact that SMEs have been the main beneficiaries of loan 

guarantees. This trend is also observable in the total volume of risk-weighted amounts, as reported 

in the EBA Risk Dashboard, where declines are found in the majority of EU countries with only few 
exceptions.90 

88   See Section 1 for further details on the impact of the COVID-19 pandemic on the EU economy and financial system. 

89   See Regulation (EU) 2020/873 of the European Parliament and of the Council of 24 June 2020 amending 

Regulations (EU) No 575/2013 and (EU) 2019/876 as regards certain adjustments in response to the COVID-19 
pandemic. 

90   See EBA Risk Dashboard Q3 2020. 

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63 

 
 
Chart 3.2.F 

Changes in original exposures and risk-weighted amounts of main exposure classes 

Risk-weighted amounts for exposures to SMEs have declined despite an increase in original 

exposures 

(LHS: percentage; RHS: EUR billions) 

Exposures – change Q2 2020 / Q4 2019
RWA – change Q2 2020 / Q4 2019
Original exposures – Q4 2019 (right-hand scale)

6%

4%

2%

0%

-2%

-4%

-6%

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

NFCs excluding SMEs

SMEs (corporate and retail
exposures)

Retail exposures secured by real
estate

Other retail non-SME exposures

Sources: EBA supervisory reporting and ESRB Secretariat calculations. 
Notes: NFCs excluding SMEs refers to the exposure class “Corporates – Other”. Retail exposures secured by real estate 
excludes retail SME exposures. The revised SME supporting factor entered into force on 28 June 2020 and, as such, is 
supposed to be included in the Q2 2020 figures. 

Despite concerns about a potential future increase in NPLs, the ratio of NPLs and advances 
decreased throughout 2020 in relation to the same quarters in 2019.91 For some countries, the 
ratio of NPLs even distinctly decreased in 2020 (see Chart 3.2.G). NPL ratios were heterogeneous 

in the EEA, ranging from 0.5% in Sweden to 25.5% in Greece in the fourth quarter of 2020, though 

the NPL rate for the latter was driven by legacy issues, as in other countries. According to the EBA 

analysis, the share of loans classified as Stage 2 (with a significantly increased, but still not 

materialised, credit risk) had also risen since end-2019 (see Chart 3.2.G). However, the increase 

was heterogeneous across countries and seems small when considering the size of the shock 

caused by the COVID-19 pandemic. As pointed out in Section 1, proactively identifying and 

provisioning for NPLs is crucial in order to avoid repeating the errors made during previous crises, 

when NPLs accumulated and significantly hampered new lending and hence economic recovery. 

91  See EBA Risk Dashboard Q4 2020, p. 3. 

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Chart 3.2.G 

Overview of ratio of NPLs and advances in the EEA 

While there was widespread heterogeneity across the EEA, CY and GR were clear outliers with 

respect to their ratio of NPLs 

(percentages) 

NPLs Q4 2019
Stage 2 loans Q4 2019

NPLs Q4 2020
Stage 2 loans Q4 2020

35.2%

25.5%

20%

18%

16%

14%

12%

10%

8%

6%

4%

2%

0%

AT BE BG CY CZ DE DK EE ES FI FR GR HR HU IE IS IT LT LU LV MT NL NO PL PT RO SE SI SK GB

Source: EBA Risk Dashboard, fourth quarter. 
Note: Data retrieved from the EBA Risk Dashboard exclude Liechtenstein. 

Current levels of provisioning by European banks may be insufficient in view of the 
expected increase in NPLs. While European banks substantially increased their provisions during 
2020, closely following developments in the real economy (Chart 3.2.H), it is not possible to identify 
a clear upward trend in the provisions for Stage 2 loans across European banks (Chart 3.2.I).92 A 
comparison with the hypothetical behavioural response of banks to the adverse scenario of the 

2018 EBA stress test exercise reveals that the current level of provisions, although rising, may be 

insufficient. In the first year of the adverse scenario, banks reported an increase in the share of 

Stage 2 exposures of 6 percentage points, while the increase in coverage amounted to 1 

percentage point. As can be seen in Chart 3.2.I, few European banks came close to these amounts 
at the end of Q3 2020.93 Furthermore, no relationship between the estimated impact of the COVID-
19 pandemic on the country of domicile of banks and the changes to their Stage 2 provisioning can 

be observed. There is large cross-country and intra-country heterogeneity in this area. Other 

factors, such as the way banks account for government support measures in their expected credit 

loss models or profitability constraints resulting in under-provisioning at some banks, could explain 
the heterogeneity observed in European banks’ provisioning during 2020.94 

92   Coverage can be understood as the accumulated impairment related to some exposures divided by the value of the 

exposures. 

93   For a broader discussion on the role of stress tests and scenario tools in the COVID-19 pandemic, see Section 2.3. 

94   See Financial Stability Review, ECB, November 2020. 

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Chart 3.2.H 

Loan loss provisions for loans at amortised cost 

Provisions have increased, albeit also showing increased heterogeneity across banks 

(LHS: percentage; RHS: index, inverted) 

Interquartile range
Median
GDP Index (inverted, Q4 2019 = 100)

1.6

1.4

1.2

1.0

0.8

0.6

0.4

0.2

0.0

75

80

85

90

95

100

105

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

2019

2020

2021

Sources: SNL, ECB and ESRB Secretariat calculations. 
Notes: Loan loss provisions are based on impairments reported by a sample of 67 banks in SNL. The GDP index is inverted and 
in the dotted part refers to the December 2020 central projections by the ECB (RHS). 

Chart 3.2.I 

Change in the share of Stage 2 loans and their coverage 

With few exceptions, the share of Stage 2 exposures and their coverage remained broadly stable 

(percentage points) 

Severe impact
Average impact

Significant impact
Moderate impact

6%

4%

2%

0%

-2%

-4%

)
0
2
0
2

3
Q

-
9
1
0
2
4
Q

(
e
g
a
r
e
v
o
c
Δ

-6%

-10%

-5%

0%

5%
Δ Stage 2 loans (Q4 2019 - Q3 2020)

10%

15%

20%

Sources: S&P Market Intelligence and ESRB Secretariat calculations. 
Notes: Based on a sample of 47 European banks from Austria, Belgium, Germany, the Czech Republic, Estonia, Lithuania, 
Poland, Slovakia, Cyprus, Italy, Spain, Denmark, Finland, Sweden. The impact of the pandemic was estimated using the 
autumn forecast of the European Commission for the sum of forecasted GDP growth in 2021 and 2020 of the country of 
domicile of the bank. Severe, significant, average and moderate impact refer to a cumulative GDP fall between 2020 and 2021 
above 5%, between 3% and 5%, between 1% and 3% and below 1%, respectively. 

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Banks tightened lending conditions, particularly in the second half of 2020, but maintained 
interest rates of new loans at low levels. If banks perceive an increase in credit risk due to a 
deteriorating macroeconomic environment, they can tighten both the interest rates and the terms 

and conditions of their loans to shield themselves from potential credit losses in the short term. 

According to the ECB’s BLS, lending conditions for NFCs were aggravated during 2020, particularly 

from the third quarter onwards (see Chart 3.2.J), even if the tightening was not as pronounced as 
during the global financial crisis.95 This tightening could be linked to the expected phase-out of the 
support measures to NFCs (i.e. loan guarantees and moratoria). For households, lending 

conditions tightened throughout 2020 as a whole. Regarding interest rates of new loans, evidence 

from the ECB suggests that interest rates of new loans increased only in the case of lending to 

NFCs with larger amounts and longer maturities (i.e. those that could generate more credit losses 
to the bank), whereas a negative trend was observed in other categories of loans.96 The low 

interest rate environment as well as the policy actions by monetary, fiscal and prudential authorities 

may explain why interest rates did not increase despite the increased credit risk. 

Chart 3.2.J 

Changes in credit standards for loans to NFCs (LHS) and to households for home purchase 

(RHS) 

Lending standards tightened in the second half of 2020 

(net percentages) 

Euro area
France
Germany

Italy
Spain

50

40

30

20

10

0

-10

-20

-30

-40

-50

70

60

50

40

30

20

10

0

-10

-20

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2018

2019

2020

2018

2019

2020

Sources: ECB and ESRB Risk Dashboard. 
Notes: Net percentages of banks contributing to the tightening of standards over the previous three months. The last 
observation refers to the quarter in which the most recent BLS was published. 

3.2.3 

Profitability, liquidity and solvency 

Banks’ capitalisation in relation to RWA remained broadly stable throughout the COVID-19 
pandemic. In the EEA97, the average fully loaded CET1 ratio increased marginally by end-2020 

95   See The euro area bank lending survey – third quarter of 2020 and The euro area bank lending survey – fourth 

quarter of 2020. 

96   See ECB Statistics Bulletin. 
97   Data retrieved from the EBA Risk Dashboard (excluding Liechtenstein). 

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67 

 
 
 
when compared with the end of 2019 (see Chart 3.2.K). There is significant heterogeneity across 

EEA countries, as some (for example, EE, LV, HR) are better capitalised than others (for example, 

ES, GR and IT). The average EEA fully loaded CET1 ratio stood at 15.5% in the fourth quarter of 

2020, well above the regulatory minimum. The stability of banks’ capitalisation was caused by a 

decline in risk weights, the retention of capital, as well as the low credit losses in 2020. 

Chart 3.2.K 

Fully loaded CET1 ratio in the EEA 
23 EEA countries saw an increase in their CET1 from pre-pandemic levels to the fourth quarter of 

2020, while six saw a drop in their capitalisation 

(percentages) 

Q4 2019
Q4 2020 (positive change from Q4 2019)
Q4 2020 (negative change from Q4 2019)

30%

25%

20%

15%

10%

5%

0%

AT BE BG CY CZ DE DK EE ES FI FR GR HR HU IE IS IT LT LU LV MT NL NO PL PT RO SE SI SK

Sources: EBA Risk Dashboard, fourth quarter. 
Note: Data retrieved from the EBA Risk Dashboard exclude Liechtenstein. 

The leverage ratio, which is not dependent on risk weights, declined in the first quarter of 
2020 before subsequently returning to its pre-crisis level. The leverage ratio fell by 0.4 
percentage points in March 2020 from its end-2019 value in the EU and by more than a percentage 

point for FI, GR, NO and SI. The average leverage ratio was 5.6% in June 2020, and all Member 

States were well above the minimum level of 3%. Nevertheless, SE, NL, DK, DE and FR exhibited 

leverage ratios below 5%. This shows that the amount of equity in the balance sheet of some EU 

banks was relatively small compared to their total assets. From September, leverage ratios 

increased back to pre-crisis levels, partially as a result of the exclusion of central bank exposures 
from the computation of the ratio.98 

Banks’ profitability substantially decreased at the onset of the coronavirus pandemic and 
remained low throughout 2020. Although return on equity was already at low levels prior to the 
COVID-19 pandemic, it declined further in the second quarter of the year, undergoing a slight 

recovery by the end of 2020 (see Chart 3.2.M). The increase in loan loss impairments, derived from 

the perception of higher credit risk in banks’ balance sheets, can explain the deterioration of 

profitability in the first two quarters of 2020 (see Chart 3.2.L). Low profitability has been one of the 

98   See ECB allows temporary relief in banks’ leverage ratio after declaring exceptional circumstances due to 

pandemic, ECB, 17 September 2020. 

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68 

 
 
 
main characteristics of the EU banking system after the global financial crisis. One of the reasons 

behind the persistently low profitability of EU banks is the elevated operational costs, which 

negatively affect the efficiency of banks measured through the cost-to-income ratio. The average 

cost-to-income ratio in the EEA increased by 4% from Q1/Q2 2019 to Q1/Q2 2020. In the fourth 

quarter of 2020, it stood at 65.1%, with banks in CY, DE, FR, IT and MT having high cost ratios on 

average. The declines in bank profitability may further exacerbate investors’ concerns about the 

banks’ medium-term capacity to generate profits, which may be indicated by the low market 

capitalisation of banks in many EU countries (also in comparison with the United States). 

Chart 3.2.L 

Return on assets and contributions by main items in the profit and loss accounts of banks 

Banks’ profitability was heavily impacted by loan loss impairments 

(percentages) 

Sources: Goldman Sachs and ESRB Secretariat calculations. 
Notes: NII stands for net interest income and ROA for return on assets. Data taken from Goldman Sachs, covering a sample of 
50 large European banks headquartered in the EEA (40), UK (five) and Switzerland (five). For the computation of the red and 
green bars, average assets between beginning and ending period are used. Green bars denote positive contributions to return 
on assets and red bars negative contributions to return on assets. Large impairment charges on goodwill in Q2 2020 and in Q4 
2020, affecting one bank in each quarter, were reclassified to impairments by the ESRB Secretariat. 

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69 

 
 
Chart 3.2.M 

Overview of return on equity (top) and cost-to-income ratios (bottom) in the EEA 

ROE across the EEA significantly declined from pre-pandemic levels, while cost-to-income ratios 

increased 

(percentages) 

Average 2019
Q2 2020
Q4 2020

25%

20%

15%

10%

5%

0%

-5%

-10%

90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

AT BE BG CY CZ DE DK EE ES FI FR GR HR HU IE IS IT LT LU LV MT NL NO PL PT RO SE SI SK

AT BE BG CY CZ DE DK EE ES FI FR GR HR HU IE IS IT LT LU LV MT NL NO PL PT RO SE SI SK

Source: EBA Risk Dashboard, fourth quarter. 

Banks’ liquidity is above the minimum regulatory requirement in all EU countries, and it has 

increased almost everywhere since the start of the pandemic mainly due to central bank 
support measures. Measured by the LCR, banks’ liquidity is above the minimum regulatory 
requirement of 100% across the whole EEA. Some EU countries (LT, LV, RO, CY, SI) have even 

reached an LCR well in excess of 300%. Banks in other EU countries (in particular NO, NL, DE, 

SE) typically have relatively lower liquidity buffers; nevertheless, their ratio is still well above the 

minimum requirements. Since the onset of the pandemic, liquidity has increased in the majority of 

Member States. The bulk of this increase was observed in the months between March and June 

2020, when the ECB and other national central banks activated measures to support banks’ 

liquidity. Thanks to these measures, banks obtained a material amount of funding at attractive rates 

despite a deteriorating economic environment. Banks in most Member States continued to increase 

their liquidity positions in the second half of 2020.  

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70 

 
 
Chart 3.2.N 

Overview of the liquidity coverage ratio in the EEA 

The LCR is above the minimum regulatory requirement in each country and increased during the 

second quarter of the pandemic 

(percentages) 

December 2019
June 2020
December 2020

400%

350%

300%

250%

200%

150%

100%

50%

0%

AT BE BG CY CZ DE DK EE ES FI FR GR HR HU IE IS IT LU LV MT NL NO PL PT RO SE SI SK

Source: EBA Risk Dashboard, fourth quarter. 

3.3 

Policies for banks 

In 2020, macroprudential policy was used mostly with the aim to mitigate the effects of the 
COVID-19 pandemic on banks and on credit supply more broadly. The countries under review 
took 50 measures of macroprudential interest, an increase of 17 (excluding reciprocations) 
compared with the previous year.99 Measures taken in 2020 mostly consisted of releases of the 

CCyB. Compared to 2019, there was a substantial increase in macroprudential activity regarding 

the relaxation of liquidity measures, the loosening of borrower-based measures (BBMs) such as 

loan-to-value (LTV) and debt-service-to-income (DSTI) ratios, changes of the SyRB and O-SII 
buffers (not only due to COVID-19 but also the entry into force of CRD V100 in 2021), as well as 

extensions of national flexibility measures (not related to addressing the effects of COVID-19). 

24 EEA countries (and the United Kingdom) took macroprudential actions in 2020 (see Chart 
3.3.A). The level of activity exhibited by different countries relates both to the asymmetric way in 
which COVID-19 affected the Member States’ domestic economies and to the instruments they had 

in their power to counteract it. The latter explains, for instance, why all but one Member State with a 

CCyB in place at the onset of the pandemic either partially or fully released it or cancelled pending 

99   There were no reciprocating measures in 2020. In 2019, there was an exceptionally high number of reciprocations, which 

were related to the Belgian, Estonian, French and Swedish national flexibility measures under Article 458 of the CRR taken 
in 2018. 

100   Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit 

institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and 
repealing Directives 2006/48/EC and 2006/49/EC (OJ L 176, 27.6.2013, p. 338), as amended by Directive (EU) 2019/878 
of the European Parliament and of the Council of 20 May 2019 amending Directive 2013/36/EU as regards exempted 
entities, financial holding companies, mixed financial holding companies, remuneration, supervisory measures and powers 
and capital conservation measures (OJ L 150, 7.6.2019, p. 253).  

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increases, and why some Member States which did not have a CCyB in place resorted to structural 

buffer releases. Other Member States chose to relax BBMs to prevent previously implemented 

measures from being overly punitive to households whose incomes had already been severely hit 

by the pandemic. 

Chart 3.3.A 

Measures taken by Member States in 2019 and 2020 

(number of notifications received by measure type (left panel) and country (right panel)) 

2019
2019 reciprocation
2020

CCyB

11

13

Reciprocation (recognition)

Change in SyRB rate

DSTI

LTV

Change in SII methodology

18

7

5

4

5

2

2

4

4

Change in SyRB methodology

1

4

Loan maturity

4

1

Article 458 - Risk weights

1

3

Liquidity ratio

DTI

Other

Introduction of SyRB

Loan amortisation

Article 458 - Large exposures

Stress test / sensitivity test

4

2

1

1

1

1

NO
FR
BE
UK
HU
CZ
MT
HR
DK
NL
LV
PT
SK
SI
SE
LT
DE
EE
LI
BG
LU
IS
IE
FI
AT
PL

0

5

10

15

20

25

30

0

3
3

1

3
1

1
1
1
1

1

1
1

1

1

1

1

1
1

1
1
1
1

1

2

2
2

2

2

2

1

7

2

2

2

4
4

2

1

1

4

1
3

3

3
1
1

1

4
2

4

2

2
2

2

3

4

5

6

7

8

9

10

Source: National notifications received by the ESRB in 2019 and 2020. 
Notes: Notifications do not necessarily refer to new macroprudential measures, as they can also refer to changes to measures 
already in place. They also refer to the year the measure was decided, rather than the (sometimes later) year it was 
implemented. All measures are deemed to be substantial apart from measures of a more procedural or administrative nature, 
such as exempting small and medium-sized investment firms from the CCoB or CCyB. The chart does not include decisions 
relating to unchanged CCyB rates. “Change in SII methodology” covers only changes in the methodologies for identifying global 
systemically important institutions (G-SIIs) and other systemically important institutions (O-SIIs) and the accompanying buffer 
settings (not changes in the number of G-SIIs/O-SIIs, their buffer levels resulting from the actual application of the same 
methodology or changes in the phasing-in arrangements). “Change in SyRB rate/methodology” covers changes in the rates or 
the methodology for setting the systemic risk buffer. 

Against the backdrop of COVID-19, Norway, the Czech Republic and Hungary were 
particularly active in pursuing macroprudential policy (see Chart 3.3.A). Specifically, Norway 
(temporarily) changed and extended a wide range of BBMs in a reform to its regulatory framework 

for lending. Hungary temporarily tightened its country-specific liquidity measures, such as the 

foreign exchange funding adequacy ratio and the foreign exchange coverage ratio (thereafter 

easing them again to pre-COVID levels); simultaneously, the mortgage funding adequacy ratio was 

loosened. The Czech Republic used a combination of macroprudential tools, notably a partial 

release of the CCyB rate, liquidity measures and BBMs, to counter the effects of the pandemic on 

the economy. 

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Four measures that fall under Article 458 of the CRR101 (“national flexibility measures”) were 
extended or newly adopted in 2020.102 France extended the period of application of its Article 
458 measure, which concerns the tightening of large exposure limits applicable to highly indebted 

large NFCs. Belgium and Sweden did the same for Article 458 measures relating to risk weights for 

asset bubbles in commercial and/or residential real estate, and Norway introduced two new Article 

458 measures relating to risk weights for commercial and residential real estate. In contrast, 

Finland decided not to extend its Article 458 measure, which had been used to target similar types 
of risks103, and the Netherlands postponed the introduction of a risk weight floor on domestic 

mortgage loan exposures under Article 458. 

Table 3.3.A 

Overview of active macroprudential measures in Europe (Q4 2020) 

EEA countries and the United Kingdom made use of a wide range of macroprudential tools, with a 

particular emphasis on BBMs and capital buffers 

Source: ESRB notifications. 
Notes: In the “Countercyclical capital buffer” row, the number in the box refers to the prevailing buffer rate as at Q4 2020, with 
no box meaning that the countercyclical capital buffer has not been set or a positive rate has been set but not implemented as 
at Q4 2020, the latter being reflected in the “Pending CCyB” row. The number in the boxes for G-SIIs and O-SIIs refers to the 
number of such institutions identified in the 2019 identification exercise. This is based on the application dates of the official 
notifications sent to the ESRB and does not signify whether a SII buffer has been set or not and is regardless of its phasing-in 
arrangements. 

2020 was characterised by a general loosening of macroprudential measures in EEA 
countries (see Table 3.3.B). Although the assortment of measures to which Member States 

101   Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements 
for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ L 176, 27.6.2013, p. 1). 

102   Article 458 of the CRR provides a measure of last resort to address systemic risk in the Member States that cannot be dealt 

with through other macroprudential tools. 

103   The Finnish measure expired on 1 January 2021. See press release by FIN-FSA. 

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resorted varied greatly, as noted above, the overall direction of policy was fairly homogeneous 

across the EEA. These loosening actions took the following forms: full or partial release of the 

CCyB as well as revoking previously announced increases in rates; SyRB reductions; cancellations 

of pending O-SII buffer increases or phasing-in postponements; easing of the limits applied to 

borrower-based measures such as the DSTI or LTV and relaxation of the rules underlying the 

acceptance of FX funds for liquidity measures. Independently of the type of measure used or the 

extent of its application, the fundamental goal was to support banks and contribute to the supply of 

credit to the real economy. For BBMs, an additional emphasis was placed on relieving the pressure 

on households and firms, already heavily strained by the impact of COVID-19. 

Some notable exceptions, however, lay in decisions that were not driven by COVID-19. Policy 
tightening actions in this unprecedented period were also justified by long-term policy priorities. 
This was true for Norway104, which activated an Article 458 measure to address the potential 

materialisation of risks in its commercial and residential real estate sectors, and for Luxembourg, 

which introduced LTV limits. Sweden implemented additional capital requirements for banks’ 
lending exposures to the commercial real estate sector105 in January. With the incorporation of the 
CRD IV framework106 into the EEA Agreement107, Norway implemented a new SyRB, setting a 

single 4.5% rate for all institutions. This constituted a decrease from the level that was previously 
applicable to O-SIIs (at 5%) and an increase for remaining institutions108 (at 3%). Finally, the United 

Kingdom and the Netherlands announced a replacement of their SyRB with O-SII buffer 

requirements directly related to the entry into force of CRD V. 

An analysis based only on the use of individual instruments or changes in their calibration 
gives an incomplete indication of the macroprudential policy stance in Member States. To 
obtain a more complete view of a country’s effective macroprudential policy stance, the overall 

macroprudential policy mix in place should be assessed by also taking into account the level of 

systemic risk in a given Member State. The ESRB is currently operationalising the concept of 
macroprudential stance, which aims to guide this assessment.109 

104   However, Norway also loosened other measures and is therefore represented in yellow in the “Real estate instruments” 

column of Table 3.3.B, namely: it temporarily increased the permitted mortgage volume to deviate from the regulatory 
requirements, and it allowed lenders to deviate from the debt-to-income requirement and stress test when issuing a 
residential mortgage loan, where the purpose of the loan is to restructure existing debt held by borrowers that are not able 
to service the debt. 

105   The risk weight was set at 35% for corporate exposures collateralised by commercial real estate and 25% for corporate 

exposures collateralised by commercial residential properties; see press release by Finansinspektionen. 

106   The CRD IV legislative package comprises Directive 2013/36/EU and Regulation (EU) No 575/2013. It does not include the 
changes introduced by Regulation (EU) 2019/876 of the European Parliament and of the Council of 20 May 2019 amending 
Regulation (EU) No 575/2013 as regards the leverage ratio, the net stable funding ratio, requirements for own funds and 
eligible liabilities, counterparty credit risk, market risk, exposures to central counterparties, exposures to collective 
investment undertakings, large exposures, reporting and disclosure requirements, Regulation (EU) No 648/2012 (OJ L 150, 
7.6.2019, p. 1), and Directive (EU) 2019/878 (OJ L 150, 7.6.2019, p. 253) or any subsequent amendments. 

107   Decision of the EEA Joint Committee No 81/2019 of 29 March 2019 amending Annex IX (Financial services) to the EEA 

Agreement [2020/831] incorporated CRD IV into the Agreement on the European Economic Area. 

108   A transitional rule applies, however, for all institutions that do not follow the internal ratings-based (IRB) approach – for 

these institutions, the rate for all exposures will be 3% until 31 December 2022. This rule is not applicable to systemically 
important institutions (see Recommendation ESRB/2020/14). 

109   A Review of Macroprudential Policy in the EU in 2018, ESRB, April 2019, Special Feature B. 

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Table 3.3.B 

Tightening or loosening of macroprudential measures in 2020 

EEA countries mostly undertook loosening policy actions throughout 2020, the majority of which 

were in response to the challenges posed by COVID-19 

Member State 

Countercyclical 
capital buffer 

Systemic risk 
buffer 

SII buffer 

Real estate 
instruments 

Other 
instruments 

Austria 

Belgium 

Bulgaria 

Croatia 

Cyprus 

Czech Republic 

Denmark 

Estonia 

Finland 

France 

Germany 

Greece 

Hungary 

Iceland 

Ireland 

Italy 

Latvia 

Liechtenstein 

Lithuania 

Luxembourg 

Malta 

Netherlands 

Norway 

Poland 

Portugal 

Romania 

Slovakia 

Slovenia 

Spain 

Sweden 

United Kingdom 

→ 

↓ 

↓ 

→ 

→ 

↓ 

↓ 

→ 

→ 

↓ 

↓ 

→ 

→ 

↓ 

↓ 

→ 

→ 

→ 

↓ 

↑ 

→ 

→ 

↓ 

→ 

→ 

→ 

↓ 

→ 

→ 

↓ 

↓ 

→ 

n/a 

→ 

↓ 

n/a 

→ 

→ 

↓ 

↓ 

n/a 

n/a 

n/a 

↓ 

→ 

→ 

n/a 

n/a 

→ 

n/a 

n/a 

n/a 

↓ 

↑↓ 

↓ 

n/a 

→ 

→ 

n/a 

n/a 

→ 

↓ 

→ 

→ 

→ 

→ 

↓ 

→ 

→ 

→ 

↓ 

→ 

↓ 

↓ 

↓ 

→ 

→ 

→ 

→ 

→ 

↓ 

→ 

↓ 

↑↓ 

→ 

→ 

↓ 

→ 

→ 

→ 

→ 

↓ 

↑ 

→ 

→ 

n/a 

→ 

→ 

↓ 

→ 

→ 

↓ 

→ 

→ 

n/a 

→ 

→ 

→ 

n/a 

→ 

→ 

→ 

↑ 

↓ 

→ 

↑↓ 

↓ 

→ 

→ 

→ 

↓ 

n/a 

→ 

→ 

→ 

→ 

→ 

→ 

→ 

→ 

→ 

→ 

↓ 

→ 

n/a 

n/a 

↑↓ 

n/a 

→ 

n/a 

→ 

→ 

n/a 

→ 

→ 

n/a 

→ 

→ 

↑↓ 

→ 

→ 

→ 

n/a 

→ 

→ 

Source: ESRB notifications received in 2020. 
Notes: ↑ (red) refers to a tightening; ↓ (green) refers to a loosening; → refers to no change; n/a stands for non-applicable. The 
latter denotes that no related measure has been notified to the ESRB and recorded in its Overview of national measures of 

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75 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
macroprudential interest in the EU. “Real estate instruments” include any instrument (borrower-based or capital-based) 
dedicated to the residential or commercial real estate sectors. The “Other instruments” column includes instruments which do 
not fall into any of the other categories. Tightening/loosening refers to the policy situation compared with the situation before the 
adoption of the measure. The table refers to measures taken in 2020, but which may sometimes come into effect later. 
Measures coming into effect in 2020 but adopted earlier are not shown. In the case of O-SII/G-SII buffers, tightening/loosening 
refers to changes in the methodology of the G-SII/O-SII identification and buffer-setting or changes in the phasing-in 
arrangements. The loosening action on the O-SII buffer(s) for CY, GR, LT, MT and PT consists of a postponement of their 
phasing-in schedules. SE lowered the prescribed level of the O-SII buffer on account of CRD V, but the buffer was applied for 
the first time (previously, the higher of the SyRB and O-SII buffer was applicable – in SE’s case, the SyRB). Real Estates 
measures for SE reflects mainly the pause in amortisation requirement for RRE. It should also be noted that a decision was 
taken by the FSA in January 2020 to raise risk weights for CRE. 

3.3.1 

Macroprudential buffers 

3.3.1.1  Releases of the CCyB110 and structural buffers 

In response to the COVID-19 pandemic, Member States used the CCyB to support the 
banking sector and maintain the flow of credit to the real economy. This macroprudential 
response in times of stress is in line with the intended countercyclical use of the CCyB. The cause 

of the economic crisis was an unprecedented exogenous shock rather than excessive aggregate 

credit growth and the endogenous build-up of cyclical system-wide risk. However, the uncertainty 

about the effect of losses in the real economy on the banking sector was and still is very large. 

Expected economic difficulties of corporations and households threaten to worsen the credit quality 

of bank balance sheets. In such an environment, banks might become excessively cautious in their 

lending, precisely when bank credit is necessary to contain the shock to the real economy and 

support the recovery. The release of CCyBs sent a signal to banks amid the worsened economic 

outlook that supervisors were willing to help banks weather the crisis. It freed up capital that banks 

could use to absorb credit losses and support lending, while the simultaneous communication on 
system-wide pay-out restrictions111 ensured that the capital was not used for pay-outs.  

Most Member States with a positive CCyB at the start of the year fully or partially released it, 
while other Member States cancelled pending increases. Of the 11 EEA countries and the 
United Kingdom that had positive CCyB rates prior to the pandemic, seven fully released (DK, FR, 

IE, IS, LT, SE, UK) and three partially released (CZ, NO, SK). In addition, seven Member States 

and the United Kingdom cancelled pending increases. As an exception, LU opted not to release its 

CCyB nor cancel the pending increase (see Chart 3.3.B). This divergence in approaches cannot be 

explained by differences in the magnitude of the expected economic shock or its propagation to 

bank balance sheets and is based on the judgement of the respective designated authorities. 

110   As this year’s review focuses on the COVID-19 pandemic, this section focuses on the CCyB for domestic exposures. As 
the main text does not cover CCyBs for third-country exposures, this footnote provides an update on the associated 
developments in 2020. When revising the list of material third countries, the ESRB additionally included Mexico (see Annex 
1). The list now contains Brazil, China, Hong Kong, Mexico, Russia, Singapore, Switzerland, Turkey and the United 
States. The Member States also ran their annual revisions of their own lists and followed the methodologies as given in 
Annex 1. The ESRB, the ECB and the national authorities monitored the third countries found to be material for their 
respective jurisdictions. For the members of the BCBS, reciprocation of each other’s CCyB rate up to 2.5% is mandatory 
and the same principle applies for the ESRB’s membership. However, to date the only country which has implemented a 
non-zero CCyB and is not a member of the ESRB is Hong Kong, which lowered its CCyB rate from 2% to 1% on 16 
March 2020. 
111   See Section 2.2. 

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Chart 3.3.B 

Releases of and cancellations of pending increases in the CCyB rate across EEA countries 

and the United Kingdom 

All but one Member State with a CCyB in place released the buffer or cancelled planned increases 

(buffer rates in percentages) 

CCyB rate still in place
Released portion of the CCyB

Planned increases in the CCyB
Cancelled pending increases

3.0%

2.5%

2.0%

1.5%

1.0%

0.5%

0.0%

NO

SE

IS

CZ

SK

DK

UK

BG

IE

LT

FR

LU

BE

DE

Source: ESRB. 
Notes: A CCyB rate was seen as being in place or phased-in as soon as the targeted credit institutions were required to take it 
into account when computing their institution-specific CCyB rates before 15 February 2020. All announced releases and 
cancellations of pending increases made in 2020 were taken into account, including subsequent releases and cancellations. In 
addition to the releases in some Member States, designated authorities communicated forward guidance indicating that no 
changes to the (released) CCyB rate were envisaged for a certain period, e.g. in IE throughout 2021 as communicated in its 
FSR 2020:II. 

Countries responded swiftly to the outbreak of the crisis, and by the beginning of April most 
countries had released their CCyB buffers. During the second week of March, Norway and 
Denmark decided to release their CCyB buffers. It was during this week that the World Health 

Organization declared Europe as the centre of the pandemic. These releases took place well 

before any COVID-19 related increase of NPLs and deterioration of banks’ capital positions were 

expected to materialise. This swiftness supports the hypothesis that, as well as allowing for loss 

absorption at a later stage and supporting continued credit supply, the calming of markets and the 

signalling of supervisory flexibility were key objectives behind the releases.  

Credit-to-GDP gaps increased due to the contraction in GDP and the increase in lending in 

some Member States to meet the liquidity needs of the real economy during the crisis, 

confirming that this indicator is not informative in such periods (especially if lending 
increases). The credit-to-GDP gap increases when the economic cycle evolves more quickly than 
the credit cycle. This increase (Chart 3.3.C, upper panel) should not be interpreted as a sign to 

increase or rebuild the CCyB at this time. Even in its publications prior to the COVID-19 period, the 

ESRB repeatedly noted the limitations of the credit-to-GDP gap as an indicator to inform the buffer 
guide.112 

112   See, for example, A Review of Macroprudential Policy in 2019, ESRB, April 2020.  

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Chart 3.3.C 

Changes in the credit-to-GDP gap and the growth rate of credit to the real economy across 

Member States 

As expected, credit-to-GDP gaps increased during the crisis across most Member States 

(upper panel: percentage points; lower panel: percentages) 

Credit-to-GDP gap (Q4 2019)
Credit-to-GDP gap (Q2 2020)

Increase
Decrease

40

20

0

-20

-40

-60

-80

-100

-120

-140

10.0%

)
0
2
0
2

2
Q
–
h
w
o
r
g
r
a
e
y
e
n
o
(

s
H
H
d
n
a

s
C
F
N
o
t

t
i
d
e
r
C

7.5%

5.0%

2.5%

0.0%

-2.5%

FR HR SE DE AT SK CZ FI RO BG MT IT EE UK BE LT PL LV SI HU GR NL ES DK* PT LU CY IE

Decline in the growth rate 
Increase in the growth rate 

Increase
Decrease

FR

FI

LU

BE

SE

BG

UK

HR

DE

AT

EE

CZ

MT

RO

PL

ES

PT

DK

IT

GR

CY

NL

IE

LT

LV

-5.0%

-5.0%

-2.5%

0.0%

2.5%
Credit to NFCs and HHs (one-year growh – Q2 2019)

5.0%

7.5%

10.0%

Sources: ECB and ESRB Secretariat calculations. 
Notes: The growth rate is computed as the ratio between the flow at period t and the stock at t-1. (*) For Denmark, no data for 
Q2 2020 were available; Q1 2020 data were used instead. HU is not displayed in the right panel given that it is an outlier 
(13.10% and 13.20% for credit to NFCs and HHs (one-year growth – Q2 2019 and Q2 2020, respectively). 

Four countries fully or partially reduced their SyRB in response to the COVID-19 economic 
crisis (see Chart 3.3.D). These adjustments either represented a full (EE, FI, PL) or a partial 
reduction113 (NL). The downward recalibrations applied to either all institutions (EE, FI, PL), or only 

to systemically important institutions (SIIs) where an institution-specific SyRB complemented an O-

SII buffer (NL). The ESRB was notified of these four releases in the space of five days (between 20 

and 25 March 2020), at a time when the pandemic was becoming prominent and widespread in 

Europe. These buffer reductions were meant to bolster banks’ loss-absorbing capacity above buffer 

113   However, NL notified the ESRB of a further reduction in November, this time a full reduction. 

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78 

 
 
 
 
 
 
 
 
 
 
 
 
requirements, providing banks with additional headroom and thus preventing a negative impact on 

their supply of credit to the real economy. 

Furthermore, Hungary suspended the revision of its SyRB rates due to the expectation that 
it would result in an excessively high SyRB rate in the midst of the pandemic. With effect 
from January 2020, Hungary changed the scope of its SyRB, outlining that it should be applied to 

all credit institutions with problem project exposures and non-problem FX project exposures above 
the de minimis limit.114 Recognising that the COVID-19 emergency would lead to an increase in the 

level of non-performing and restructured CRE project loans, i.e. problem exposures, the national 

authority concluded that the scheduled revision to its SyRB rates could result in an increase in the 

applicable rate for some banks. Hungary thus suspended the application of the general provisions 

of the SyRB and postponed its revision of the buffer rate scheduled for September 2020 (which 

originally envisaged entry into effect on 1 January 2021). A higher applicable rate (above zero) 

would have reduced the capacity of banks to lend to companies and households.  

Chart 3.3.D 

SyRBs in place in 2020 and reductions related to the COVID-19 emergency 

Of the 16 EEA countries that had an SyRB in place before the COVID-19 outbreak, only four chose 

to reduce it in response to the crisis 

(percentages) 

Current minimum buffer rate
Current range buffer rate

Minimum buffer rate before COVID-19
Range buffer rate before COVID-19

6%

5%

4%

3%

2%

1%

0%

AT
(all)

BG
(dom)

HR
(all)

CZ
(all)

DK
(all)

FO
(dom)

EE*
(dom)

EE*
(dom)

FI*
(all)

FI*
(all)

IS
(dom)

LI
(all)

NL*
(all)

NL*
(all)

NO
(all)

PL*
(all)

PL*
(all)

RO
(all)

SK
(dom)

SE
(all)

UK
(all)

Source: National notifications received by the ESRB between 2017 and 2020. 
Notes: The asterisk represents countries which reduced their SyRB (partially or fully) on account of the COVID-19 pandemic. 
Austria (AT), the Czech Republic (CZ), Denmark (DK), Finland (FI), Liechtenstein (LI), the Netherlands (NL), Slovakia (SK) and 
Sweden (SE) applied the SyRB to a subset of institutions; FO stands for the Faroe Islands; “dom” stands for countries which 
applied the SyRB to domestic exposures, i.e. all exposures located in the Member State that set that buffer to address the 
macroprudential risk of that Member State; “all” stands for countries which applied the SyRB to all exposures, i.e. all exposures 
located in the Member State that set that buffer to address the macroprudential risk of that Member State and outside the 
Member State. The buffer rates represented in the chart are those in place in 2020, not those announced in 2020 to be 
implemented at a later date. 

114   Problem exposures are defined for the purposes of the SyRB as the gross amount of domestic commercial real estate 
project loans if these: (i) are non-performing for more than 90 days; (ii) are restructured, with the exception of loans 
restructured more than a year ago that have become performing loans since; or (iii) are other project loans that are deemed 
non-performing by the financial institution; and the gross amount of domestic on-balance sheet held-for-sale commercial 
real estate. Foreign currency exposures qualified as non-problem mean the gross value of domestic commercial real estate 
project loans in foreign currency and not classified under problem exposures (see notification by the Magyar Nemzeti 
Bank).  

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The reduction of SyRBs aimed to achieve a similar effect as the release of a CCyB, providing 
relief to the banking sector. None of the four Member States reducing their SyRB applied or 
intended to apply a positive CCyB rate before the COVID-19 outbreak, meaning that no capital 

could be released via the CCyB. The expectation that banks might be unwilling to dip into their 

buffers for fears of the supervisory response or market stigma, or to avoid distribution restrictions 

that automatically apply when buffers are breached, may – besides the aim of supporting credit 

supply – have motivated the reductions of structural buffers.  

Member States’ changes to buffers for SIIs were diverse both in scope and intensity. No 
changes in systemic importance scores – the criterion that is most frequently used by countries 

when setting O-SII buffer levels for their institutions – were reported. However, certain Member 

States recalibrated the applicable buffer rates in 2020 for some (FI, NL) or all (HU) of their SIIs in 

response to the pandemic (see Chart 3.3.E). This extraordinary change was motivated by the need 

to provide the SIIs with sufficient lending capacity. The reduction of these structural buffers without 

a reduction in systemic importance appears to have been aimed at a temporary easing of 

regulatory requirements independent of the risks stemming from systemic importance.  

Several countries postponed the planned phasing-in of their O-SII buffers. In all cases, the 
phasing-in period was prolonged by one year and was applied by Member States to all (CY, GR, 

PT) or selected institutions (LT, MT). Following the reduction to zero of the O-SII buffer for eight 

institutions, Hungary has already expressed its intention to rebuild its buffers to their original levels.  

Chart 3.3.E 

Recalibration of the O-SII buffer levels 
In order to avoid a procyclical response from banks, the O-SII buffer of ten institutions across three 

Member States was reduced 

(y-axis: buffer in percentages; x-axis: SII score in basis points) 

Pre-COVID-19 buffer in FI
Post-COVID-19 buffer in FI
Pre-COVID-19 buffer in HU

Post-COVID-19 buffer in HU
Pre-COVID-19 buffer in NL
Post-COVID-19 buffer in NL

2.5%

2.0%

1.5%

1.0%

0.5%

0.0%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Source: ESRB notifications received in 2020. 
Notes: The banks represented in the chart are: OP Group (FI); CIB Bank Zrt. (HU); Erste Bank Hungary Zrt. (HU); Kereskedelmi 
és Hitelbank Zrt. (HU); Magyar Takarékszövetkezeti Bank Zrt. (HU); MKB Bank Nyrt. (HU); OTP Bank Nyrt. (HU); Raiffeisen 
Bank Zrt. (HU); UniCredit Bank Hungary Zrt (HU); and ABN AMRO Bank N.V. (NL). 

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15 Member States used their structural and/or cyclical buffers to boost the lending capacity 
of banks (Chart 3.3.F). Finland and the Netherlands reduced an institution-specific SyRB. Finland 
increased its banks’ lending capacity by around €52 billion through the reduction of the SyRB for all 

credit institutions and adjustments in buffer rates, which was achieved through a 1% decrease in 

the O-SII buffer applicable to one SII. The Netherlands decreased its structural buffers to support 

lending to businesses, while expressing the intention of gradually rebuilding its capital requirements 

to their original level. However, it aims to do so through the CCyB, i.e. transforming structural 

buffers into countercyclical buffers. 

Member States without a positive CCyB rate reduced their structural buffers to ease 
pressure on credit supply. These countries decided to reduce either their O-SII buffers (HU), 
SyRB (EE, PL) or both (NL, FI). None of the tools in the EU macroprudential policy framework is 

explicitly meant to address exogenous shocks such as a pandemic. However, all buffers are 

ultimately designed to help banks absorb losses. Given its releasability, the CCyB could be 

considered the most intuitive macroprudential instrument to be used in the COVID-19 crisis to 

alleviate capital constraints for lending. The O-SII buffer and SyRB address different risks than the 
CCyB115, but reducing them ultimately also eases banks’ buffer requirements in the same vein. A 

main drawback is that the underlying structural risk did not disappear when reducing structural 

buffers. Moving forward, lessons will have to be drawn from the experience with the buffer 

framework during the COVID crisis.  

Chart 3.3.F 

Changes in scope, level or phasing-in of capital buffers by Member States  
14 EEA countries recalibrated their capital buffers in response to COVID-19, albeit in different 

ways: through releases, reductions or postponements of planned increases 

Changes in relation to the CCyB
Changes in relation to the SyRB
Changes in relation to the SII buffer

BE* CZ 

DE*  DK   FR   IS   

NO   SE   SK   UK   BG•

IE†

‡
LT

PL

EE

FI   NL

HU†

‡
GR

‡
PT

‡
CY

‡
MT

Source: ESRB. 
Notes: (*) In BE and DE, no strictly positive CCyB was formerly in place. (•) In BG, the CCyB was not reduced, but the pending 
increase was cancelled. (†) In IE and HU, no strictly positive SyRB was applicable for any bank, but HU suspended its general 
requirements for the SyRB while IE deferred the transposition of an SyRB into Irish law, meaning that the Central Bank of 

115   According to Recommendation ESRB/2013/1, the systemic risk buffer targets structural risk and aims to strengthen the 
resilience of the banking system, while the SII capital surcharges, namely the O-SII buffer, are meant to enhance the loss-
absorbing capacity of SIIs taking into account their high systemic importance. 

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Ireland did not have the power to set an SyRB .(‡) In CY, MT, GR, LT and PT, no SII buffers were reduced, but the phasing-in 
of pending increases was postponed instead. 

Chart 3.3.G 

Timeline of decisions to release macroprudential buffers or cancel pending increases during 

the COVID-19 pandemic 
Within one month, 17 Member States reduced or cancelled the increase of at least one of the 

buffers they had in place prior to the pandemic 

Source: ESRB. 
Notes: The date indicates the week in which the decision was made. CZ decided to cancel its planned increase from 1.75% to 
2% on 19 March 2020 and decreased its CCyB rate to 1% on 26 March 2020. SK decided to release its CCyB buffer on 28 April 
2020. 116 

To support credit supply through crises, banks’ capital buffers need to be usable to 

continue financing the economy and absorb losses, and macroprudential authorities have 

started discussing the lessons to be drawn from the impact of the COVID-19 crisis on the 
buffer framework. There is a concern that banks may start to behave procyclically if they are not 
able or willing to use their buffers. In practice, banks may have many reasons not to use their 

buffers, including fears of further credit losses, uncertainty about the timing or speed of buffer 

replenishment in the future, and fear of stigma from financial markets or rating agencies, leading to 

higher funding costs or possible restrictions on distributions. Banks may also be unable to use their 

capital buffers or management buffers because of overlapping requirements, for example with 

respect to binding leverage ratio or minimum requirements for own funds and eligible liabilities. 

With this in mind and due to the ongoing uncertainty over how the COVID-19 crisis will affect banks’ 

balance sheets, macroprudential authorities have started discussing solutions to removing 

disincentives to use buffers, as well as more medium-term changes to the regulatory framework. 

Macroprudential authorities and regulators may consider removing disincentives in banks’ 
willingness to use capital buffers if they are significant and harmful to the real economy. The 
willingness of banks to draw on capital freed up by regulatory buffer releases or other supervisory 

action is likely to be influenced by the length of time during which a lowered requirement will remain 

116   A detailed overview of the sequence of national measures can also be found in Anguren, R., Gutiérrez de Rosas, L., 
Palomeque, E. and Rodríguez García, C. J., “The regulatory and supervisory response to the COVID-19 crisis”, 
Financial Stability Review, No 39 – autumn 2020, Banco de España. 

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82 

 
 
 
in force. In the short term, supervisory authorities could achieve greater alignment of incentives 

through clear, forward-looking communication related to the expected duration of capital release 

measures, the timeframe to restore capital, potential restrictions, the economic outlook and the 

expected implications for banks’ capital adequacy.  

In the medium term, more fundamental changes to the current regulatory framework may be 
necessary. Given the EU Commission’s forthcoming review of the macroprudential framework in 
2022, starting this discussion is timely. The case for more fundamental changes to the regulatory 

framework arguably depends on how material the evidence for impediments to buffer usability is, as 

well as the extent to which such impediments to buffer usability contribute to adverse outcomes 

(e.g. reduction of credit supply) at the macroeconomic and/or systemic level in periods of crisis. The 

current crisis has not yet fully tested the current framework. However, in the event that banks are 

presented with incentives to avoid restrictions to the maximum distributable amount (MDA), thereby 

leading them not to use the buffers, potential medium-term measures could include a greater role 

for releasable capital buffers to avoid adverse consequences for credit supply at the system level 

during downturns. Further considerations relate to the composition of capital, partly with a view to 

reducing the complexity of the capital framework. Of particular concern is the role of AT1 

instruments in regulatory going-concern capital, and whether these should be excluded from the 

mandatory MDA mechanism in case of buffer breaches, which would arguably require excluding 

AT1 instruments from going-concern regulatory capital altogether.  

3.3.1.2 

Systemic risk buffer 

At the start of 2020, 17 countries (16 Member States plus the Faroe Islands) had an SyRB in 
place. Besides differences in their rates, these SyRBs differ in terms of their motivation, the range 
of institutions they apply to and the exposures they cover. The assortment of configurations prior to 

31 March 2020 and subsequent changes are displayed in Chart 3.3.D and Chart 3.3.H. These 

configurations can be explained by the risks targeted by this instrument, which broadly fall into 
three categories117: (i) risks stemming from the structural characteristics of the banking sector, (ii) 

risks stemming from the propagation and amplification of shocks within the financial system, and 

(iii) risks to the banking system stemming from either the real economy or specific sectors. 

117   See A Review of Macroprudential policy in the EU in 2019, ESRB, April 2020, pp. 68-70 for a detailed analysis. 

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Chart 3.3.H 

Configurations of the SyRB 

There is widespread heterogeneity in the configuration of the SyRB, driven by the differing risks 

that Member States target with the application of the buffer 

(number of Member States) 

12

10

8

6

4

2

0

Single rate Multiple rates Specific banks

All banks

Domestic
exposures

All exposures

Under 3%

Exactly 3%

Over 3%

Buffer rate range

Banks targeted

Exposures targeted

Max. level of the buffer rate

Source: ESRB notifications received between 2017 and 2020. 
Notes: These configurations refer to the SyRB in place until 31 December 2020; the configurations of the SyRB in place before 
31 March 2020 for EE, FI and PL are represented in spite of the subsequent deactivation of the SyRB on account of COVID-19. 

With effect from 1 January 2020, the CRD IV framework was incorporated into the EEA 
Agreement, which means that the relevant EU law also applies to Norway. Upon its 
incorporation at end-2019, a revision of the existing SyRB rules to ensure compliance with Article 
133 of CRD IV was indispensable.118 Given that the CRD IV framework was not in place before this 

revision, two factors forced institutions to hold more capital in order to reach a certain capital 

adequacy ratio: the presence of a Basel I floor and the absence of the SME supporting factor. 

Based on this higher minimum capitalisation prior to the incorporation of CRD IV, the remaining 

systemic risk to be covered by the SyRB, and hence the SyRB rate, was lower. Following the 

adoption of the CRD IV framework and the consequently lower minimum capitalisation, Norwegian 

authorities increased the SyRB level for banks applying the IRB approach in order to address the 

otherwise uncovered systemic risk. 

Norway notified the ESRB of an intended change to the scope and level of its existing SyRB, 
applicable from 31 December 2020 onwards. With respect to scope, the main change lies in the 
exposures covered by the SyRB, which are now limited to domestic exposures. The decision was 

taken in view of the fact that this tool is designed to target systemic risk in Norway, and that most 
Norwegian credit institutions conduct all or most of their activities in Norway.119 With respect to 

level, while the previous SyRB stood at 5% for SIIs and 3% for all other institutions, a single rate of 
4.5%120 is now applicable to all institutions.121 To prevent a decrease in the capital requirements 

118   See Recommendation ESRB/2020/14 for more information on the background to the revision of the SyRB. 
119   See Recommendation ESRB/2020/14 for the specific configuration of the Norwegian systemic risk buffer. 
120   In accordance with Articles 133(14) and 133(15) of CRD IV, if a Member State wishes to set an SyRB above 3%, the ESRB 
and EBA (the latter optional) must provide an opinion to the Commission before the latter decides whether the proposed 
measure can be implemented by the Member State. In the Norwegian case, the Standing Committee of the EFTA States 
provided an opinion, while the Commission did not. 

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applicable to SIIs resulting from the 0.5% decrease in the applicable SyRB, Norway further 
implemented an O-SII buffer (applicable to its two SIIs122), cumulative with the SyRB for domestic 

exposures. The Norwegian authorities requested reciprocation of the SyRB measure in 2021, and 

the issue is currently being assessed against the complications arising from the application of CRD 

IV in EEA EFTA States and the application of CRD V in the neighbouring EU countries. 

Following the transposition of CRD V into national law in late 2020, no countries have so far 
expressed their intention to use the sectoral SyRB. CRD V allows for an SyRB which may also 
target, besides all exposures of an institution and all exposures to a particular country, sectoral 
exposures, including those linked to residential and commercial real estate.123 On 30 September 

2020, in accordance with Article 133(6) of the CRD, the EBA issued its final guidelines on the 

appropriate subsets of sectoral exposures to which a competent or designated authority may apply 
an SyRB.124 The guidelines suggest a common framework of dimensions and sub-dimensions from 

which the relevant authority can define a subset of exposures and include detailed definitions of 
elements used in each dimension and sub-dimension, along with examples of application.125 No 
Member State has so far used this increased flexibility nor notified the ESRB of its intention to do 

so. 

Member States have, however, begun adapting the combination of their SyRB and O-SII/G-
SII buffers to comply with the CRD V framework. CRD IV described two different interactions 
between the SyRB and the O-SII or G-SII buffer.126 The higher of the two was applicable in case 

the SyRB applied to all exposures, and the sum of the SyRB and O-SII or G-SII buffer was 

applicable if the SyRB covered only domestic exposures. By contrast, CRD V does not make 

distinctions based on the extension of applicability, and the SyRB is always cumulative with 

whatever SII buffer is applicable (the higher of the G-SII and O-SII buffers). Furthermore, in order to 

avoid the overlap between the risks addressed by the two measures, authorities must now outline 

why, in their opinion, the SyRB will not duplicate the functioning of the O-SII buffer in their 
notifications to the ESRB.127 Whenever the designated or competent authorities set or reset 

existing buffers, they need to comply with the CRD, as amended by CRD V. In this way, buffer-

setting practices will be gradually adapted to the new CRD V framework.  

Only three Member States (HR, NL, SE) and the United Kingdom have announced a 
recalibration to the level of their buffers on account of CRD V. Croatia replaced two different 
SyRB rates, which depended on the nature, scope and complexity of its institutions’ activities (set at 

1.5% and 3%), with one single SyRB rate. This new SyRB, which will amount to 1.5% for all 

institutions, is cumulative with the O-SII buffer. Overall, structural capital requirements for Croatian 

121   A transitional rule applies for all institutions that do not follow the internal ratings-based (IRB) approach – for these 
institutions, the rate for all exposures will be 3% until 31 December 2022. This rule is not applicable to systemically 
important institutions (see Recommendation ESRB/2020/14). 

122   An O-SII buffer requirement will apply at the highest level of consolidation to two identified O-SIIs as of 31 December 2020: 

a 2% buffer for DNB Bank ASA and a 1% buffer for Kommunalbanken AS (see Recommendation ESRB/2020/14). 

123   Articles 133(4) and 133(5) of CRD IV. 
124   See Guidelines on the appropriate subsets of sectoral exposures to which a competent or designated authority 

may apply a systemic risk buffer, EBA, September 2020. 

125   The compliance table to EBA/GL/2020/13 shows that most Member States already comply or intend to comply with the 

guidelines when the necessary legislative or regulatory proceedings have been completed. 

126   Article 133(4) and (5) of CRD IV; note that the SyRB always interacts with the higher of the O-SII and G-SII buffers. 
127   Article 133(9)(f) of CRD V. 

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O-SIIs have increased by 0.5%128 (see Chart 3.3.I). Similarly, Sweden has, until now, applied the 
higher of the two structural buffers to cover all exposures – the SyRB, which stood at 3% (versus 

the O-SII buffer, at 2%). However, with the O-SII buffer becoming cumulative with the SyRB, 

Sweden announced a decrease of the O-SII buffer applicable to the three institutions that maintain 

an active SyRB, from 2% to 1%. The exposures are now covered by the SyRB and the O-SII buffer, 

so that the combined buffer requirements increased by 1% to a total of 4% (see Chart 3.3.I). The 

United Kingdom will fully replace its institution-specific SyRB, activated in 2019 and amounting to 

between 1% and 2%, with equivalent O-SII buffer requirements. 

In response to the changes introduced by CRD V, the Netherlands intends to change the 
composition of its capital requirements and to build up a CCyB. It is, however, important to 
distinguish the actions taken by NL in response to COVID-19 with those related to the transition to 

the new CRD V framework. In March 2020, as a response to COVID-19, the O-SII buffer rate for 

one Dutch institution (ABN AMRO Bank N.V.) was reduced, while the SyRB requirements for the 

country’s three largest banks were lowered. In addition, it was decided to gradually build up a 

neutral CCyB of 2% once macroeconomic conditions normalised, with the intention to keep the 

combined buffer requirements (CBRs) stable while changing their structural and cyclical 

composition. As a result – still under the CRD IV framework, where the highest of the SyRB and O-

SII buffer applied – a 2.5% SyRB rate was applicable for ING N.V., while for ABN AMRO Bank N.V. 

and Coöperatieve Rabobank U.A. both buffers stood at 1.5% and 2%, respectively. In November 

2020 – following the adoption of CRD V, under which the SyRB and the O-SII buffer are treated as 

additive – the SyRB was abolished for all three banks and the O-SII buffer rate for ING Bank N.V 

was raised from 2% to 2.5%, in order to keep the structural capital requirements stable. 

With the transposition of CRD V into Irish law, the SyRB is now part of the macroprudential 
policy toolkit available to the Central Bank of Ireland. However, the latter notes in its flagship 
publication129 that, although the small and highly globalised nature of the Irish economy and 

financial system provides a rationale for its implementation in the future, it will not begin the 

phasing-in of the buffer in 2021. 

128   For one O-SII, Privredna banka, the overall structural requirement to be effectively applied increased only by 0.25% due to 

the cap on the subsidiaries of the EU O-SII parent (Intesa Sanpaolo) pursuant to Article 131(8) of CRD V. 

129   Financial Stability Review 2020: II, Central Bank of Ireland. 

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Chart 3.3.I 

Amendments to the structural buffer rates for O-SIIs on account of CRD V 

Member States have mostly retained their structural buffer requirements, instead changing the mix 

between the O-SII buffer and the SyRB 

(percentages) 

O-SII buffer before CRD V
O-SII buffer after CRD V
SyRB before CRD V

SyRB after CRD V
Structural capital requirements before CRD V
Structural capital requirements after CRD V

4%

3%

2%

1%

0%

1

p
u
o
r
G

2

p
u
o
r
G

O
R
M
A
N
B
A

.

V
N
k
n
a
B

e
v
e
i
t
a
r
e
p
ö
o
C

.

.

A
U
k
n
a
b
o
b
a
R

.

.

V
N
k
n
a
B
G
N

I

i

a
k
s
v
a
n
d
n
a
k
S

i

n
e
k
n
a
B
a
d

l
i

k
s
n
E

a
k
s
n
e
v
S

B
A
n
e
k
n
a
b
s
e
d
n
a
H

l

B
A
k
n
a
b
d
e
w
S

4

p
u
o
r
g
-
b
u
s
B
F
R

5

p
u
o
r
g
-
b
u
s
B
F
R

3

,
2
,
1

p
u
o
r
g
-
b
u
s
B
F
R

i

y
t
e
c
o
s

g
n
d

i

l
i

u
B

Croatia

Netherlands

Sweden

United Kingdom

Source: ESRB notifications received in 2020. 
Notes: Group 1 in Croatia includes Zagrebačka banka d.d., Zagreb, Privredna banka Zagreb d.d., Zagreb, 
Erste&Steiermärkische Bank d.d. Rijeka, Raiffeisenbank Austria d.d., Zagreb, and OTP banka Hrvatska d.d., Zagreb; group 2 
includes Addiko Bank d.d., and Hrvatska poštanska banka d.d., Zagreb; RFB (which stands for ring-fenced body) sub-group 1, 
2, 3 in the United Kingdom includes the Barclays RFB sub-group, the HSBC RFB sub-group and the Santander UK RFB sub-
group; RFB sub-group 4 in the United Kingdom stands for The Royal Bank of Scotland RFB sub-group; RFB sub-group 5 in the 
United Kingdom stands for Lloyds Banking Group RFB sub-group; the building society in the United Kingdom is the Nationwide 
Building Society; the buffer rates represented in the chart for Dutch banks as being “before CRD V” are those implemented after 
a COVID-19-driven reduction in buffer rates enacted in March 2020 – the structural capital requirements in relation to these 
buffers did not change when adapting the CBR to the CRD V framework. 

3.3.1.3  Capital buffers for SIIs 

In 2020, 11 institutions130 were categorised as global systemically important institutions (G-
SIIs) across six countries (five Member States plus the United Kingdom). The number of G-
SIIs has not changed from the G-SII identification exercise carried out in 2019, and the buffer levels 

have likewise remained unchanged (see Chart 3.3.J). The phasing-in of the G-SII buffers ended in 

2019. France and the United Kingdom retain the highest number of G-SIIs at four and three 

respectively, while Germany, Italy, Spain and the Netherlands count one G-SII each. For 

institutions to which any combination of O-SII buffer, G-SII buffer and SyRB applies, the CRD IV 

framework foresaw that the highest of the buffers was applicable (unless the SyRB was only 
applied to domestic exposures).131 Banks in four Member States (DE, ES, FR, IT) are only subject 

130   G-SIIs as notified in 2020: Banco Santander S.A. (ES); Deutsche Bank AG (DE); BNP Paribas (FR); Groupe Crédit 

Agricole (FR); Societé Générale (FR); Groupe BPCE (FR); UniCredit Group (IT); ING N.V. (NL); HSBC Holdings Plc (UK); 
Barclays Plc (UK); Standard Chartered Plc (UK). 

131   Pursuant to Article 131(14) of CRD IV, which reads as follows: “Where a group, on a consolidated basis, is subject to the 
following, the higher buffer shall apply in each case: (a) a G-SII buffer and an O-SII buffer; (b) a G-SII buffer, an O-SII 
buffer and a systemic risk buffer in accordance with Article 133. Where an institution, on an individual or sub-consolidated 
basis is subject to an O-SII buffer and a systemic risk buffer in accordance with Article 133, the higher of the two shall 
apply.” 

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87 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
to the O-SII and G-SII buffers (NL and UK have notified the ESRB that the same will happen in their 

jurisdictions from 2021 onwards on account of the CRD V framework – see below); the O-SII and 

G-SII buffers share the same rate in three of these countries (ES, FR, IT). In order to keep CBRs 
neutral after the SyRB became cumulative as established in the CRD V framework132, NL abolished 
the SyRB (which stood at 2.5%) and partially replaced it with increased O-SII buffer rates from 

December 2020. Likewise, the United Kingdom applied an SyRB to two of its G-SIIs (Barclays Plc 

and HSBC Holdings PLC), but the SII buffers, being higher, prevailed. After the implementation of 

the CRD V framework, the G-SII buffer (or the O-SII buffer, if higher) became cumulative with the 

SyRB, and in December 2020, the United Kingdom therefore decided to remove the SyRB for these 

institutions and to instead introduce O-SII buffer requirements at the same level, keeping CBRs for 

its G-SIIs stable. CZ, which did not apply O-SII buffer requirements in 2020, will do so after the 

transposition of CRD V into national law. 

The annual O-SII identification exercise in the Member States and the United Kingdom 

resulted in the classification of 195 institutions as O-SIIs, the same net number as the one 
observed in 2019. Nevertheless, three Member States (DE, FR, PL) recognised one new 
institution as an O-SII, while three others (LU, RO, SI) removed one institution from their list. Two of 

the additions relate to the transfer of parts of the concerned institutions’ business from the United 

Kingdom to the SSM area on account of Brexit (DE, FR), while the other follows the increase in 

systemic importance of one institution (PL); two of the removals stem from the fact that the 

institutions no longer meet the applicable score threshold to be considered an O-SII (LU, RO), while 

the remaining one is due to a merger between two institutions flagged as O-SIIs in the 2019 

identification exercise (SI). The number of O-SIIs varies significantly across countries, ranging 

between two in Norway and 13 in Germany for the EEA and standing at 15 in the United Kingdom 

(see Chart 3.3.J). 

132   Pursuant to Article 131(15) of CRD V, which reads as follows: “Where an institution is subject to a systemic risk buffer, set 
in accordance with Article 133, that buffer shall be cumulative with the O-SII buffer or the G-SII buffer that is applied in 
accordance with this Article. Where the sum of the systemic risk buffer rate as calculated for the purposes of paragraph 10, 
11 or 12 of Article 133 and the O-SII buffer rate or the G-SII buffer rate to which the same institution is subject to would be 
higher than 5%, the procedure set out in paragraph 5a of this Article shall apply.” 

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Chart 3.3.J 

Number of SIIs by country in the EEA and the United Kingdom 

The number of SIIs remained broadly unchanged in 2020, with two countries reporting one O-SII 

less than in the previous year and three countries identifying one new O-SII each 

(number of institutions) 

Removed O-SIIs
O-SIIs 2020
New O-SIIs

O-SIIs 2019
G-SIIs 2020
G-SIIs 2019

16

14

12

10

8

6

4

2

0

-2

AT BE BGCY CZ DE DK EE ES FI FRGRHRHU IE IS IT LI LT LU LV MT NL NO PL PT ROSE SI SK UK DE ES FR IT NL UK

O-SIIs

G-SIIs

Source: ESRB notifications received in 2019 and 2020. 
Notes: The SII classifications and changes are based on the notifications the ESRB received pertaining to the 2019 and 2020 
identification exercises; the changes shown result from comparing the two. The G-SII/O-SII identifications are to take effect 
immediately or in the near future. All G-SIIs are also identified as O-SIIs. 

Chart 3.3.K 

Fully phased-in G-SII levels announced in 2020 
In general, Member States apply the same G-SII and O-SII buffer rates; where an SyRB is in place, 

the higher of the latter and the G-SII buffer applies 

(percentages) 

O-SII buffer
G-SII buffer
SyRB (only applicable until transposition of the CRD V framework into national law)

3.0%

2.5%

2.0%

1.5%

1.0%

0.5%

0.0%

BNP
Paribas

Groupe
Crédit
Agricole

Société
Générale

Groupe
BPCE

Deutsche
Bank AG

UniCredit
Group

ING N.V.

Banco
Santander
S.A.

HSBC
Holdings Plc

Barclays Plc Standard
Chartered
Plc

France

Germany

Italy

Netherlands

Spain

UK

Source: ESRB notifications received in 2020. 
Note: Until the transposition of CRD V into Dutch national law, ING N.V. was subject to the higher of the applicable O-SII buffer 
rate (which stood at 2%) and SyRB rate (which stood at 2.5%). In November 2020, this 2.5% SyRB rate was replaced with a 

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2.5% O-SII buffer rate. Likewise, the United Kingdom replaced the 1% SyRB rate applicable to two of its G-SIIs with an 
equivalent O-SII buffer rate at the end of 2020. 

In 2020, 15 Member States amended the O-SII buffer rate applicable to their institutions, 
resulting in changes for 38 institutions. Of these, five institutions were assigned a more 
stringent O-SII buffer requirement (CY, IE, MT, NL133, SI), while the remaining institutions saw a 
decrease in the level of their buffers (see Chart 3.3.L). Several factors precipitated the recalibration 

of the buffer levels: management of the effects of the COVID-19 pandemic (three countries); 

changes in the overall systemic importance scores in 2020 relative to 2019 (seven); recalibrations 

of the combination of the SyRB and O-SII buffer to keep structural requirements neutral after the 

transposition into national law of the CRD V framework (two), due to be implemented by the end of 
2020134; recalibration following the inclusion of the CRD IV framework into the EEA Agreement 
(one); change in the O-SII identification methodology (one); and change in the applicable buffer to 

the foreign parent bank of a subsidiary (one). 

Chart 3.3.L 

O-SII buffer levels relative to systemic importance scores 

In 2020, there was a prevalent loosening of the O-SII buffer stance, with far more rate decreases 

than increases even when discounting the immediate response to COVID-19 

(y-axis: buffer in percentages; x-axis: SII score in basis points) 

Confirmed Buffer
Increased Buffer
Decrease Buffer

3.0%

2.5%

2.0%

1.5%

1.0%

0.5%

0.0%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

6,000

6,500

7,000

7,500

Source: ESRB notifications received in 2019 and 2020. 
Note: Excludes COVID-19-related releases, represented in Chart 3.3.E; the introduction of SII buffer requirements in the United 
Kingdom on account of the introduction of the CRD V framework is not included in this chart, as well as the introduction of these 
buffer requirements for newly designated O-SIIs. 

In order to capture the specificities of their banking systems when designating O-SIIs, some 
Member States chose not to comply with the EBA guidelines in 2020. Breaches stemmed from 

133   Note that for NL, the CBRs remained the same since the O-SII buffer rate was raised to match the SyRB rate that was 

applicable prior to the transposition of CRD V into national law. 

134   Member States were required to transpose the CRD V framework into national law by 28 December 2020. This framework 
refined the scope of the SyRB to avoid overlaps with the CCyB, G-SII and O-SII buffers. Since the buffers must address 
different risks, the SyRB will now be cumulative with the O-SII or G-SII buffer. This sum is capped at 5%, from which point 
onward the Member States require approval from the European Commission following opinions from the EBA and ESRB; 
see Article 131(15) of CRD V. 

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various factors and were justified by Member States based on the peculiarities of their institutions: 

not including all the mandatory indicators in the identification exercise (CY for investment firms; LT); 

excluding, when exercising supervisory judgement, O-SIIs that had been identified as such in Title 

II (LV); reshuffling the weights set by the EBA for each indicator (EE). In addition, the breach of the 

EBA guidelines was also related to the identification threshold (SI, see below). 

In spite of the disparity in minimum scores to identify O-SIIs, the majority of Member States 
complied with EBA thresholds for the systemic risk score in 2020. In 2014, the EBA 
established the criteria prescribed to Member States to identify O-SIIs among their institutions.135 
These guidelines provide Member States with four criteria to consider in their quantitative 

assessment (size, importance, complexity, interconnectedness) and a set of mandatory indicators, 

from which a systemic risk score is to be derived. The threshold for this score is set at the 

discretion of countries between 275 and 425 basis points, but 350 points is recommended by the 

EBA. Institutions whose score is above the predefined threshold are automatically identified as O-

SIIs. In 2020, six countries had a threshold below the EBA’s recommendation, whereas five 

countries had a threshold above it, despite staying within the EBA’s defined range. SI, however, 

uses a threshold of 500 –outside the range defined by the EBA and therefore not compliant with the 

guidelines. Since in a second step Member States can use supervisory discretion to classify 

institutions which scored below the threshold as O-SIIs, the existing scores for O-SIIs in the EU and 
UK in 2020 were as low as 103136 and, in fact, for selected institutions in seven countries (AT, BE, 

DE, DK, FR, NL, UK), stood below 275 basis points. 

Supervisory judgement137 is still extensively used in the EU and UK to account for the 
specificities of countries’ banking systems. According to the guidelines set by the EBA, 
countries can use supervisory judgement to capture systemic risk in their domestic sector or the 

economy of the European Union through additional indicators of systemic importance, where the 
floor for the systemic risk score is much lower at 4.5 basis points.138 In 2020, most countries used 

supervisory judgement to complement their O-SII identification exercise, often adding optional 

indicators as listed by the EBA guidelines to account for domestic characteristics. While in many 

cases this only confirmed the conclusions derived from Title II, 31 institutions across 11 countries 

were categorised as O-SIIs through this process. The greatest contributions came from Germany 

and the United Kingdom, which together classified 17 institutions as O-SIIs through supervisory 

assessment, 11 of which were assigned systemic risk scores below 200 basis points. 

135   See Title II – Scoring methodology for the assessment of the O-SIIs of EBA/GL/2014/10. The O-SII assessment as outlined 
by the EBA happens in two stages: the first (outlined in Title II) describes the set of mandatory indicators that should be 
used to derive a systemic score for each relevant entity and then designate the countries’ O-SIIs; the second (described in 
Title III) describes the use of supervisory assessment in designating O-SIIs, i.e. the discretionary power that national 
authorities hold to identify institutions that have not been automatically designated in title II as O-SIIs as such, so that the 
latter may capture the level of systemic risk present in their domestic sector or the economy of the Union. 

136   Institution designated by Germany under Title III – Supervisory assessment of O-SIIs of EBA/GL/2014/10. 
137   Supervisory assessment (described in Title III of EBA/GL/2014/10) should be used when authorities wish to designate O-
SIIs that have not been automatically identified in the first step of the process through the use of the mandatory indicators. 
In this case, authorities may wish to consider other factors specific to their banking systems or domestic indicators of 
systemic importance, and designate institutions that originally scored below the threshold as O-SIIs. 

138   See Title III – Supervisory assessment of O-SIIs of EBA/GL/2014/10. 

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Chart 3.3.M 

Actual SII scores and buffer levels across the EEA and UK in 2020 

Banks with similar scores of domestic systemic importance face different O-SII buffer rates across 

EEA countries and the United Kingdom 

(EBA O-SII scores in basis points) 

0.1%
0.25%
0.5%
0.75%
1%
1.25%

1.5%
1.75%
2%
2.5%
3%

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

Source: ESRB notifications received in 2020. 
Note: The chart refers to fully phased-in buffer rates. 

Countries are yet to take advantage of the additional buffer space offered by the CRD V 
framework. The amendments to the CRD concerning the O-SII buffer allow for countries to set 
their O-SII buffer level at 3% of the total risk exposure139, a one percentage point increase from the 
previous 2% cap.140 Of the countries that use bucketing models, only Germany has amended its 

categories to allow for buffer rates of up to 3%. However, it has not yet been deemed necessary to 

make use of the additional capital buffers and hence no buffer rate above the previous 2% legal 

cap has been set. 

With the implementation of CRD V, Member States also have greater room to set higher O-
SII buffers for subsidiaries of O-SIIs. Under CRD IV, the O-SII buffer of a subsidiary of an O-SII 
or G-SII was capped by the higher of (i) 1% of the total risk exposure amount, and (ii) the O-SII/G-

SII buffer applicable to the parent group. CRD V instead determines that the O-SII buffer of the 

subsidiary should not exceed the lower of: (i) the sum of the O-SII or G-SII buffer rate applicable at 

the group level and 1% of the total risk exposure amount; and (ii) 3% of the total risk exposure 
amount.141 This modification provides more room for discretion at the host country level to cover 

the systemic risk of O-SIIs and ensure a level playing field between domestic banks and 

subsidiaries. 

139   Subject to an authorisation by the Commission, the O-SII buffer can be set higher than 3%; see Article 131(5) of CRD V. 
140   See Article 131(5) of CRD IV. 
141   According to Article 131(8) of CRD V, the latter can also be capped at the rate authorised by the Commission to be applied 

to the group on a consolidated basis.  

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3.3.2 

Real estate-related measures 

The real estate sector plays an important role in financial and macroeconomic stability given 
its tight links with both the real economy and the financial system. Housing represents a large 
part of household wealth and constitutes a significant share of bank lending, so RRE risks are 

regularly analysed as sources of systemic risk. Previous crises have shown that the impact of a 

downturn in real estate markets on financial stability and the real economy can be both direct and 

indirect and can manifest itself through various channels (e.g. reductions in consumption, higher 

credit default rates, decreasing bank credit to the real economy). Thus, the ESRB – alongside 

national authorities and the ECB – has been closely following developments in the real estate 

market and mortgage lending. 

Table 3.3.C 

Borrower and capital-based measures applied to real estate across EEA countries and the 

United Kingdom 

In 2020, EEA countries and the United Kingdom recalibrated macroprudential measures on account 

of the COVID-19 shock and also introduced new measures not related to the crisis 

Source: ESRB. 
Note: Article 458 of the Netherlands has not been included in the table because the measure was cancelled before its activation 
due to the COVID-19 pandemic. 

3.3.2.1  Capital-based measures 

In recent years, several macroprudential authorities have taken action to address risks 
building up in their real estate markets by increasing their credit institutions’ risk weights. 
The CRR grants national authorities the power to increase risk weights based on Articles 124, 164 

and 458. Pursuant to Articles 124 and 164, the competent authority may set either higher risk 

weights for credit institutions using the standardised approach (SA) or higher minimum loss given 

default (LGD) values for banks using the IRB approach for exposures secured by immovable 

property (see Section 3.3.4.2). Other Member States have opted to use their national flexibility 

powers under Article 458(2)(d)(iv) of the CRR to target asset bubbles in the residential property and 

commercial property sector, for which Articles 124 and 164 of the CRR were identified to be less 

suitable and effective in dealing with the changes in the intensity of macroprudential or systemic 

risks in the financial system. 

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Article 124 of the CRR for standardised approach (SA) credit institutions 

Relevant authorities may set higher risk weights for credit institutions using the SA for 

exposures fully and completely secured by mortgages on immovable property pursuant to 
Article 124 of the CRR. This article allows for the setting of risk weights between 35% and 150% 
for exposures secured by mortgages on RRE and between 50% and 150% for exposures secured 

by mortgages on commercial immovable property. Member States have used this Article to target 

their RRE-related risks in the form of either (i) decreasing the threshold for the market or mortgage 

lending value of the property, as applicable, which is in general 80% as stated under Article 

125(2)(d) for the part of the loan to which a risk weight of 35% is assigned when secured by 

mortgages on residential property; and/or (ii) a stricter definition of what constitutes an exposure 

which is “fully and completely secured by mortgages on residential property”. When using this 

article for CRE exposures, authorities have increased the preferential risk weight to 100% (instead 

of the standard 50%) for the part of the loan below the maximum LTV threshold, rather than 
changing the LTV threshold itself.142 These measures have been used rather frequently by some 

Member States in the past and stayed in place throughout 2020 (see Table 3.3.D), although no 

additional country has activated this article in the last few years.  

Table 3.3.D 

The use of Article 124 of the CRR 
EEA countries frequently used Article 124 of the CRR to set higher risk weights for real estate loans 

in the past, and only PL changed its measure in 2020 

BG

HR

IE

LI



LV

MT



NO

PL

RO

SE





















RRE

CRE

Max. LTV

Definition

Risk weight

Definition





UK

SI





Source: ESRB macroprudential measures database. 
Notes: The maximum LTV levels for a mortgage to obtain the preferential 35% risk weight in MT and SI are 70% and 60%, 
respectively. In LI, a two-tier approach is taken where the part of the mortgage up to an LTV of two-thirds can obtain the 
preferential risk weight of 35%, while the part of the mortgage in breach of that LTV (but still below 80%) carries the risk weight 
of 50%. Definitions refer to the use of Article 124 to implement stricter requirements in order for an exposure to be considered 
“fully and completely secured by mortgages” either on RRE or CRE. PL reduced its risk weight from 100% to 50% for exposures 
secured by specific categories of CRE, while continuing to apply the 100% risk weight for exposures secured by other CRE. 

Article 164 of the CRR for IRB credit institutions 

Article 164 of the CRR allows for the setting of higher exposure-weighted average LGD 

values for retail exposures secured by immovable property of credit institutions using the 
IRB approach. The risk weights for IRB banks are a function of both the LGD and the probability of 
default (PD) parameters. This article has not been frequently used by Member States, as it has 

been considered inadequate to address risks of real estate exposure for IRB banks. In particular, 

notifying authorities have mentioned as inconvenient of activating this article that it has implications 

142   The maximum LTV threshold to which the standard 50% risk weight can be applied, as stipulated by Article 126(2)(d) of the 

CRR, is 50% of the market value of the property or 60% of the mortgage lending value. 

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for the calculations of expected loss amounts, that it cannot remediate too low PDs and that the 

impact is relatively stronger for banks with higher PDs, which makes the impact less homogeneous 

across banks compared to Article 458. Therefore, EEA countries have tended to use the powers 

under Article 458 of the CRR by introducing higher risk weight floors in their national jurisdictions.  

Norway is the only EEA country that has until now used Article 164 of the CRR to impose an 

exposure-weighted average LGD value for all retail exposures secured by residential 

property and not benefiting from guarantees from central governments above the 
predetermined 10%, as set out in Article 164(4) of the CRR. Since 2014, Norway requires its 
IRB institutions to have a minimum exposure-weighted LGD of 20% for its IRB institutions for the 
mentioned exposures.143 However, Norwegian authorities are of the view that the measure is not 

sufficient, as it still enables some institutions to operate with average risk weights below 20%, 

which the authorities consider to be too low. Hence, after the CRR/CRD IV framework was 

incorporated into the EEA Agreement from 1 January 2020 in Norway, the Norwegian Ministry of 

Finance notified the ESRB of its intention to also use its powers under Article 458 of the CRR to 

target asset bubbles in the residential and commercial property sector (see next section). 

National flexibility measures under Article 458 of the CRR related to real 
estate 

National authorities may implement stricter prudential measures using Article 458 of the 

CRR when they identify changes in the intensity of macroprudential or systemic risk in the 

financial system with the potential to have serious negative consequences for the financial 
system and the real economy. These so-called flexibility measures can only be used when none 
of the existing tools as specified in the CRR/CRD framework are able to effectively address the 

identified risks. To avoid misuse of these measures, the legislator foresees a multi-step notification, 

consultation and non-objection approach and limits the original duration of such measures to two 
years, with the possibility of extending them by up to two additional years each time (if needed).144 

Since 2014, a total of six countries (BE, EE, FI, FR, NO and SE) have implemented measures 
pursuant to Article 458 of the CRR. Five of the six measures are still active. In 2020, Belgium, 
France and Sweden notified the ESRB of their intention to extend the application of their existing 

measures, whereas Finland announced that it would discontinue its already once-extended 

measure after its expiration on 31 December 2020. While five measures target risks related to real 

estate exposures, the French measure aims to limit concentration risk, setting a large exposure 

requirement for highly indebted large French NFCs (see Section 3.3.3).  

Since end-2019, the Netherlands and Norway have notified the ESRB of their intention to 

adopt stricter prudential requirements for their respective IRB institutions’ risk weights: 

143   The Norwegian measure became effective as of 1 January 2014 and was implemented under the Norwegian national 

regime given that the CRR had not been incorporated into the EEA Agreement as of 1 January 2020.  

144   The measures under Article 458 of the CRR are notified by the national authorities to the European Parliament, the 

Council, the Commission, the ESRB and the EBA. The ESRB and the EBA must provide their opinions to the Council, the 
Commission and the notifying Member State within one month of receiving the notification.  

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• 

Netherlands: In October 2019, the Netherlands notified the ESRB of its intention to impose a 
minimum average risk weight for IRB banks’ portfolios of exposures to natural persons 

secured by mortgages on residential property located in the Netherlands. The risk weight of 

each individual exposure item in scope of the measure is either (i) 12% if the LTV is less than 

55%, or (ii) the weighted average of a 12% risk weight assigned to the portion of the loan not 

exceeding 55% of the market value of the property securing the loan, and a 45% risk weight 

assigned to the remaining portion of the loan. The proposed measure was scheduled to enter 

into force six months after its publication, which was intended to take place in March 2020. 

However, in March 2020, the Dutch authorities decided to defer its introduction in the light of 

the COVID-19 pandemic and its potential impact on the Dutch economy and the financial 

sector. Given the large uncertainty regarding the pandemic and its economic impact, the 

authorities considered that it was not the right time to subject the Dutch banking sector to a 

combined additional capital requirement of more than €3 billion, but to provide banks with 

more leeway to support lending in these extraordinary times. In October 2020, De 

Nederlandsche Bank provided more information on the period of the deferral and announced 

that the measure would come into force at the end of 2021 at the earliest.  

• 

Norway: The Norwegian Ministry of Finance notified the ESRB on 5 November 2020 of its 
intention to implement stricter national measures regarding the risk weights for targeting asset 

bubbles in the residential and commercial property sector pursuant to Article 458(10) of the 

CRR. The intended measures comprise a floor for exposure-weighted average risk weights of 

20% for Norwegian RRE and of 35% for CRE exposures. As this intended measure seeks to 

increase average risk weights by less than 25% for a period of two years from 31 December 

2020, the “notification-only procedure” pursuant to Article 458(10) of the CRR applies, which 

does not require the ESRB to issue an opinion on the proposed measures.  

On account of the increasing systemic risks in the RRE markets in recent years, all 

measures taken under Article 458 of the CRR, except the French measure, aim to enhance 
the resilience of credit institutions against potential negative shocks in these markets. As 
mentioned in Section 7, the ESRB issued recommendations and warnings to several EEA countries 

(BE, CZ, DE, DK, FI, FR, IS, LU, NL, NO and SE) in which the identified medium-term 

vulnerabilities in their RRE markets were considered to be high. To date, the ESRB has supported 

the introduction and/or extension of all national flexibility measures notified under Article 458 of the 

CRR through its opinions. 

3.3.2.2 

Borrower-based measures 

At the end of 2019, the majority of EEA countries had some BBMs in place, though the 
policy mix was highly heterogeneous. 24 out of 31 EEA countries had at least one BBM in place 
at the end of 2019 for risks related to RRE. Of these 24 countries, 22 used LTV limits and another 

19 used income-based restrictions. Among the latter measures, most common were DSTI limits (15 

countries), followed by maturity limits (11 countries), stress test limits (six countries), DTI limits and 

amortisation requirements (four countries) and finally LTI limits (3 countries). 14 EEA countries had 

a combination of income-based restrictions and LTV limits. For risks related to CRE, only Cyprus, 

Denmark and Poland had borrower-based restrictions in place. The types and “bindingness” of 

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policy measures implemented by EEA countries reflected the diversity of risks in the jurisdictions, 

as well as different attitudes by the authorities and legal instruments at their disposal.  

Seven tightening measures designed in 2019 by four Member States became active in 2020. 
In response to ESRB recommendations on RRE, the Banque National de Belgique (NBB) 

published supervisory expectations for mortgage lending that consist of LTV limits (which are 

differentiated for first-time buyer, other owner-occupied and buy-to-let residences) and limits for 

pockets of risk (i.e. the combination of high LTV and high DSTI/DTI). These NBB supervisory 

expectations are applicable both to all banks and all insurers which are active in loan origination in 

Belgium (of which 14 banks and four insurances companies with an outstanding amount of 

mortgage loans higher than 1 billion have to provide an annual compliance report to the NBB). 

France, Latvia and Slovakia also applied new measures that were not motivated by previous ESRB 

recommendations or warnings. The French authority Haut Conseil de Stabilité Financière (HCSF) 

set a maturity limit of 25 years for mortgage loans and recommended to banks a DSTI limit of 
33%.145 Towards the end of 2019, the Financial and Capital Market Commission of Latvia 
complemented its pre-existing LTV limits fixed at 90% in 2007 with a maximum maturity of 30 years 

for mortgage loans, a DTI limit of six times the annual income earned and a DSTI limit for housing 

loans of 40%. Finally, Národná banka Slovenska tightened the binding DSTI limit from 80% to 60% 

for both housing and consumer loans combined.  

Chart 3.3.N 

Applicable BBM measures in EEA countries in 2020 

The availability and implementation of BBM measures vary significantly across EEA countries 

LTV
Range of LTV exceptions (*)

120%

105%

90%

75%

60%

45%

30%

15%

0%

AT BE BG CY CZ DE DK EE ES FI FR UK GR HR HU IE IT LT LU LV MT NL PL PT RO SE SI SK NO LI

IS

Source: ESRB calculations. 
Notes: The chart covers measures applied before 2020 and still applicable in 2020, measures which became applicable in 2020 
and measures applied in 2020. Ranges of exceptions comprise different categories, such as different levels of LTV limits for 
different types of borrowers. The most common exceptions are LTVs for first-time buyers (FTBs), LTVs for non-first-time buyers, 
LTVs for buy-to-let (BTL) properties and LTV for loans granted through governmental programs. A number of countries also 
have allowances that permit lending above the LTV limits for FTBs, second-time and subsequent buyers (SSBs) and BTL 
lending. 

145   Note that on 27 January 2021, the HCSF introduced a new recommendation on RRE lending. The maturity limit was 
confirmed at 25 years, while the DSTI was adjusted to also include insurance fees. Following this adjustment to the 
definition, the DSTI limit was set at 35%. For more information, see the notification received by the ESRB.  

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DSTI
Range of DSTI exceptions 

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

AT BE BG CY CZ DE DK EE ES FI FR UK GR HR HU IE IT LT LU LV MT NL PL PT RO SE SI SK NO LI

IS

Source: ESRB calculations. 
Notes: The chart covers measures applied before 2020 and still applicable in 2020, measures which became applicable in 2020 
and measures applied in 2020. Income definition underlying DSTI limits can differ across countries given that no unique 
harmonised definition of income applies for DSTI limits across Member States. A cross-country comparison of DSTI limits 
should always take this information into account. 

LTI
DTI

10

9

8

7

6

5

4

3

2

1

0

AT BE BG CY CZ DE DK EE ES FI FR UK GR HR HU IE IT LT LU LV MT NL PL PT RO SE SI SK NO LI

IS

Source: ESRB calculations. 
Notes: The chart covers measures applied before 2020 and still applicable in 2020, measures which became applicable in 2020 
and measures applied in 2020. Income definition underlying LTI and DTI limits can differ across countries given that no unique 
harmonised definition of income applies for LTI and DTI limits across Member States. A cross-country comparison of DTI and 
LTI limits should always take this information into account. 

Five EEA countries relaxed income-based BBMs in 2020 in response to the COVID-19 
pandemic. Due to the potential income losses resulting from the COVID-19 pandemic, the 
macroprudential limits implemented in the expansionary phase might become overly restrictive in 

the downturn and unduly limit households’ access to credit. Against this backdrop, macroprudential 

authorities in Malta, Slovenia and the Czech Republic loosened their DSTI limits, while the Swedish 

and Norwegian authorities instead relaxed their amortisation and speed limits, respectively. Česká 

národní banka increased its DSTI limit from 45% to 50% and discontinued its existing DTI limit with 

effect from April. In June 2020, the CNB further loosened its policy by abolishing the DSTI limit. In 

Malta, lenders which could prove that their failure to meet the stressed DSTI at origination (O-DSTI) 

limit of 40% was due to temporary reasons were allowed to exceed this limit. In Slovenia, Banka 

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Slovenije amended restrictions on household lending to provide temporary flexibility to lenders. In 

March 2020, the Ministry of Finance of Norway relaxed its speed limit, moving the quarterly quota 

of new mortgages allowed to breach regulatory limits (stress test, DTI and LTV limits) from 8% in 

Oslo and 10% outside Oslo to 20% for both categories. In June, the measure was extended until 

the end of September 2020. The relaxation of the speed limit is also expected to have an effect on 

collateral side dynamics, given that Norwegian lending regulations also entail an LTV limit. In April 

2020, in order to mitigate the economic impact of the COVID-19 pandemic, Finansinspektionen (FI) 

decided to allow Swedish banks to grant an exemption from amortisation requirements. This 
measure will apply until 31 August 2021 and will not be extended further.146 

Two Member States loosened LTV limits to support the credit cycle, Malta postponed its 
phasing-in, and Norway relaxed its speed limit. With effect from the beginning of April, Česká 
národní banka increased its LTV limit from 80% to 90%. In June 2020, the Finnish Financial 

Supervisory Authority increased its loan-to-collateral ratio from 85% to 90% to support household 

demand and promote the functioning of the housing and mortgage market. Finally, the Central 

Bank of Malta granted an extension to the phasing-in of its previously approved LTV limit 

tightening, which is applicable to Category II borrowers (i.e. borrowers purchasing additional 

residential property), from the current 85% to 75% in 2021.  

Heterogeneity was observed as to Members States’ approach to BBMs during the COVID-19 
pandemic. While seven countries relaxed their BBMs to support lending and collateral dynamics, 
the vast majority of Member States took no action. This may underline the lack of consensus over 

whether BBMs are predominantly cyclical instruments whose calibration should evolve during the 

credit and housing market cycle, or whether these measures have primarily a structural character, 

safeguarding resilience by inducing prudence in lending throughout the cycle. Lending surveys 

confirm that in the aftermath of the COVID-19 shock, banks tightened their credit standards and 

raised concerns regarding potential obstacles to the flow of credit. The loosening of BBMs might 

support households’ access to credit. Nevertheless, systemic risks stemming from the 

overvaluation of property prices and rising indebtedness of households amid the low interest rate 

environment, which were the main reasons for implementing BBMs, are still present. These risks 

need to be carefully considered before loosening BBMs.  

Finally, Luxembourg and Norway announced new measures in 2020, which will become 
effective starting from 2021. After establishing a legal framework to introduce BBMs in 2019 and 
following a recommendation by the Comité du Risque Systémique (CdRS), the Commission de 

Surveillance du Secteur Financier (CSSF) activated a combination of legally binding LTV ratios in 

December 2020. The legally binding LTV limits entered into force on 1 January 2021 and are 

differentiated according to borrower categories, ranging from 80% for buy-to-let loans to 90% for 

borrowers acquiring their primary residence. The limits may also be extended to 100% for first-time 

borrowers. This ensures flexibility for banks managing the risks in their credit portfolios. The 

measure was introduced after a thorough assessment of the risks and vulnerabilities in the 

Luxembourg residential real estate market and enabled the authorities to respond to the 

recommendation issued by the ESRB in September 2019. In December 2020, the Ministry of 

Finance in Norway extended its existing lending regulation, which was set to expire at the end of 

2020, until the end of December 2024. A DTI ratio of five times the annual income earned, an LTV 

146   For detailed information about the policy decision, see the corresponding press release by Finansinspektionen. 

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limit of 85%, loan amortisation requirements for residential mortgage loans with LTV ratios above 

60%, stress test requirements for assessing borrowers’ debt service ability and finally flexibility 

quotas for mortgage loan volumes remain in place. 

3.3.3 

Other measures 

The measures reviewed in this section include all measures of a macroprudential nature that 
do not fall into one of the categories of the sections above. For the period covered by this 
review, this includes liquidity measures implemented by the Magyar Nemzeti Bank as well as a 

measure in France. While the liquidity measures in Hungary generally address risks related to 

maturity mismatch and market illiquidity, the French measure targets specific risks related to highly 

indebted large NFCs, tightening the exposure limits for SIIs when lending to such NFCs. 

Liquidity measures are often applied to ensure more stable access to market funding and to 
increase banks’ resilience to adverse currency movements. Crisis periods are indeed often 
associated with sudden and large market movements, which can severely affect liquidity conditions. 

Funding opportunities may become expensive and even disappear. Financial market turbulence 

can also involve currency adjustments and trigger capital flows that have profound effects on 

banks’ balance sheets. Among the countries which already had liquidity measures in place at the 

end of 2019 (BG, SE, NO, PL, HU), only Hungary modified its liquidity measure framework during 

2020. Moreover, no country without a previous liquidity measure in place decided to newly apply 

any such measure during 2020. 

In 2020, the Magyar Nemzeti Bank renewed its liquidity policy package with the aim of 
managing foreign exposure and ensuring long-term funding soundness. In March, Hungary 
loosened for an indefinite period its mortgage funding adequacy ratio in order to reduce the costs of 

long-term funding for banks. At the same time, other measures were tightened, before these same 

measures for foreign currency exposures and funding were relaxed in September. In particular, 

liabilities related to derivative transactions with financial companies were exempted from the 

regulatory limit computation under Hungary’s interbank funding ratio. By restoring foreign exchange 

funding adequacy ratio and foreign exchange coverage ratio regulations, the national authority 

once again considered all forex funds with a residual maturity over one year as 100% stable funds. 

Moreover, the Magyar Nemzeti Bank relaxed the currency mismatch between assets and liabilities 

to 15% of the balance sheet total, the level in effect before the pandemic.  

Furthermore, the French authorities extended their measure under Article 458 of the CRR 

that tightens exposure limits for SIIs when lending to highly indebted large NFCs resident in 
France.147 This measure was originally introduced in 2018 and aims at mitigating the impact of 
idiosyncratic corporate defaults on the most systemic institutions by limiting concentration risk. This 

stricter national flexibility measure was deemed necessary since the French macroprudential 

authority (HCSF) identified an increasing indebtedness of large French NFCs as a severe 

macroprudential risk for the French financial system. Specifically, French SIIs should not incur an 

exposure to highly indebted NFCs or groups of connected NFCs that exceeds 5% of their eligible 

147   For more detailed information on this stricter measure, see the notification by the French Haut Conseil de stabilité 

financière (HCSF) and the corresponding opinion of the ESRB. 

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capital, after credit risk mitigation and exemptions (as defined in Article 395 of the CRR). By 

deducting liquid assets from total debt, the indicator takes into account the accumulation of liquid 

assets by corporates, hence acknowledging the reduced risk posed by NFCs holding larger liquidity 

buffers. When setting the exposure threshold, the HCSF aimed at ensuring resilience (i.e. a 

sufficiently low threshold to protect the financial institutions) while keeping the preventive character 

of the measure (i.e. not too restrictive, to avoid an excessive reduction of bank exposures to large 

NFCs, triggering undesirable deleveraging). 

3.3.4 

EBA work on the regulatory framework 

3.3.4.1 

EBA work on provisions related to capital buffers 

Mandated by CRD V, the EBA clarified the sectoral use of the SyRB, reported on O-SII 
calibration and proposed amendments to the RTSs for G-SII identification. Article 133(6) of 
CRD V requests the EBA to issue guidelines on the appropriate subsets of four sectoral exposures 
to which authorities may apply a SyRB.148 Article 131(3) of CRD V requests the EBA to report to 
the Commission on the appropriate methodology for the design and calibration of O-SII buffer rates. 

The ESRB was formally consulted on these documents. Finally, the amendment of the RTSs for G-
SII identification149 and related guidelines on the specification and disclosure of systemic 
importance indicators150 were required by the change in the BCBS methodology and by CRD V.  

The guidelines on the sectoral use of the SyRB151 provide for (sub-)dimensions along which 
appropriate subsets of sectoral exposures can be defined. The main objective of the guidelines 
is to balance the flexibility in addressing sources of systemic risk while keeping the framework 

simple. The guidelines provide for three dimensions (debtor, type of exposure and type of 

collateral) and three sub-dimensions (economic activity, risk profile and geography), each with 

predefined elements that allow policymakers to cover all major sources of systemic risk. Any subset 

to which an SyRB will be applied is characterised by combining one element from each of the 

dimensions and, where appropriate, one element from any of the sub-dimensions. The SyRB can 

be applied only to subsets that are relevant sources of systemic risk. The three principles of size, 

riskiness and interconnection should guide policymakers in ascertaining the systemic relevance of 

subsets. However, no thresholds are suggested. Authorities should also be mindful of potential 

overlaps between the application of the SyRB and other macroprudential instruments. Furthermore, 

an excessively granular application of the SyRB or an application based on non-harmonised data 

may disincentivise reciprocation by other Member States. 

Following up on the mandate in CRD V, the EBA reported to the European Commission on 

the appropriate methodology for the calibration of O-SII buffer rates, after consulting the 

148   The four sectoral exposures are (i) all retail exposures to natural persons which are secured by residential property, (ii) all 
exposures to legal persons which are secured by mortgages on commercial immovable property, (iii) all exposures to legal 
persons excluding those specified in point (ii), and (iv) all exposures to natural persons excluding those specified in point 
(i). See Article 133 5(f). 

149   EBA/RTS/2020/08 (to be formally endorsed by the Commission). 
150  EBA/GL/2020/14. 
151   EBA/GL/2020/13 and EBA master summary of compliance notifications. 

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ESRB.152 The EBA advises to implement an EU-wide floor methodology, as opposed to a 
fully-fledged one. There is marked heterogeneity in O-SII buffer levels across the EU, where two 
institutions with comparable scores may be required to hold very different buffers. These 

differences are not solely explained by national specificities and raise questions over a potentially 

uneven playing field in the European Union (see also Section 3.3.1.3). To foster harmonisation, the 

EBA advises in its report to the European Commission to implement an EU-wide floor methodology. 

In principle, this approach can be interpreted as an extension to non-euro area Member States of 
the current floor methodology used by the ECB for SSM countries.153 

The EBA’s proposed methodology has two fundamental characteristics: first, it is a floor 
methodology and second, it is based on the bucketing approach. Being a floor methodology, it 
advises national authorities on the minimum buffer rate deemed appropriate for a given O-SII, 

rather than the suggested rate. With respect to the calibration of the methodology, the bucketing 

approach is used. While the bucketing approach has weaker economic underpinning compared to 

alternatives, it also has advantages in that it is pragmatic, predictable, stable over time and aligned 
with the BCBS framework for global systemically important banks.154 

However, the practical impact of such EU-wide calibration would be minimal. The EBA’s 
proposal will have limited impact on the level of O-SII capital buffers imposed by authorities 

throughout the EU. Authorities in the SSM area are already compliant with the ECB floor 

methodology, and non-SSM authorities tend to impose higher buffers than their SSM counterparts. 

The vast majority of O-SIIs are already compliant with the suggested EU-wide floor. The European 

Commission will decide on the next steps, which could entail a higher degree of harmonisation 

across the EU while allowing for national specificities to be considered. 

The EBA also proposed a draft RTS (EBA/RTS/2020/08) on the specification of the 
methodology for G-SII identification.155 This standard takes into account the international 
standards of the BCBS, which were updated in 2018 and introduced a new indicator of systemic 

importance. It also regards the alternative methodology for G-SII calculation under Article 131(2a) 

of CRD V, allowing for the reallocation of a G-SII to a lower bucket on the basis of its additional 

overall score and accounting for the specificities of the SRM. This additional score treats cross-

border exposures within the banking union as domestic for the calculation of cross-border activity 

indicators. Authorities using such discretion shall, however, adequately consider “the views or 
reservations of the BCBS”.156 Whether the alternative methodology will be used in practice and 

whether it will lead to a decline in buffer rates for G-SIIs remains to be seen. 

152   EBA/Rep/2020/38.  
153   Macroprudential Bulletin, Issue 3, ECB, June 2017. 
154   See Global systemically important banks: Assessment methodology and the additional loss absorbency 

requirement, Bank for International Settlements, December 2020. 

155  EBA/RTS/2020/08 (to be formally endorsed by the Commission). 
156   Art. 1(d) of EBA/RTS/2020/08 (to be formally endorsed by the Commission). 

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3.3.4.2 

EBA work on Articles 124 and 164 of CRR II157 

Articles 124 and 164 of the CRR allow the relevant authority to either set higher risk weights 
or higher minimum LGD values for exposures secured by immovable property. Both 
instruments are a part of the macroprudential toolkit to ensure financial stability in the European 

banking sector and affect the calculation of risk weights for exposures secured by immovable 

property. Article 124 of the CRR affects the calculation of risk weights for exposures fully and 

completely secured by mortgages on immovable property under the SA, while Article 164 of the 

CRR affects the LGD values for retail exposures secured by immovable property under the IRB 

approach.  

To strengthen macroprudential policy in the European Union, CRR II introduced several 
changes and new features to Article 124 and Article 164. CRR II splits the mandate into two 
parts and shares responsibilities between the EBA and the ESRB. The mandate of the EBA is to 

develop an RTS – in close cooperation with the ESRB – on the factors and conditions to be 

considered by authorities for the assessment of the appropriateness of risk weights under the SA 

and of minimum LGD values under the IRB approach. At the same time, the considerations on the 

activation and calibration of these measures were removed. The ESRB, on the other hand, may – 

in close cooperation with the EBA – give guidance to authorities on the factors which could 

adversely affect the current or future financial stability of the Member State and on indicative 

benchmarks that the relevant authority can take into account when determining higher risk weights 

or minimum LGD values by means of a recommendation. 

The EBA launched its work on preparing the draft RTS under CRR II in close cooperation 
with the ESRB. For this purpose, the EBA set up an expert group to draft the RTS composed of 
regulatory and macroprudential experts from national authorities and the ESRB Secretariat. The 

drafting team started its work on the RTS in spring 2020. Following a public consultation, the Board 

of Supervisors of the EBA will need to approve the draft RTS, after which it will be published on the 

EBA’s website. The expected timeline for this is around summer/fall 2021. 

157   Regulation (EU) No 575/2013, as amended by Regulation (EU) 2019/876. 

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Risks faced by other financial 

4 
intermediaries and financial markets and policies 
to mitigate them 

4.1 

Introduction 

The “dash for cash” at the onset of the COVID-19 pandemic highlighted the 

interconnectedness across, and vulnerabilities in, market-based finance and the non-bank 
financial system. The outbreak of the COVID-19 pandemic led to an increase in investor risk 
aversion, which triggered a broad-based repricing of risk. This, together with the need to make 

payments, including on margin calls on derivative positions, led to an increased demand for safe 

and liquid assets, notably cash (see Section 1.5). It created an imbalance in demand and supply 

with, for example, some segments of financial and non-financial corporate debt markets becoming 

increasingly illiquid. The “dash for cash” was accentuated by the above-mentioned margin calls on 

derivative transactions, which had ramifications for other markets. For example, redemptions by 

insurers and IORPs from MMFs correlated with the incidence of margin calls on their derivative 
exposures.158 The combination of investor redemptions and deteriorating market liquidity of the 

assets held by investment funds created liquidity management challenges for some types of MMFs 

and corporate bond funds. With some of these developments reinforcing each other, there was a 

risk that impaired market functioning would adversely affect the ability of financial and non-financial 
firms to raise funds. This would ultimately have further weakened the economy.159 

Extraordinary central bank interventions to maintain the transmission of monetary policy 
highlight the need for a macroprudential framework beyond the banking sector. Central 
banks introduced extraordinary asset purchase programmes, special liquidity operations and US 

dollar funding facilities to restore market functioning and maintain the efficient transmission of 

monetary policy measures. These interventions were effective, but expectations of public 

intervention can create moral hazards and make the build-up of vulnerabilities more likely. A 

stronger macroprudential framework for non-bank financial intermediaries would increase the 

resilience of market-based finance and reduce the need for central bank intervention during 
crisis.160 Strengthening the macroprudential framework is particularly important as the provision of 

credit to the real economy by the non-bank financial sector has significantly grown over the last 

decade and the CMU project foresees that this trend will continue.  

Reflecting these developments, the initial response by the ESRB and its members included 
many measures focused on the non-bank financial sector. Public authorities in Europe, 
including the ESRB, took measures designed to address vulnerabilities in the non-bank financial 

158   See Financial Stability Review, Box 8, ECB, November 2020.  
159   For a comprehensive overview of these developments, see, for example, Holistic Review of the March Market Turmoil, 

Financial Stability Board, November 2020.  

160   See, for example, Visco, I., “Financial stability implications of the pandemic”, welcome address at the 2nd Bank of Italy 
and Bocconi University - BAFFI CAREFIN Conference “Financial Stability and Regulation”, Rome, 22 October 2020, and 
ibid.  

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sector that were becoming apparent. These measures included action by security market regulators 

to improve market functioning. In the absence of a macroprudential framework beyond the banking 

sector, these measures by public authorities tended to be microprudential in nature and/or focused 

on the use of microprudential tools. Reflecting the macroprudential implications of these measures, 

they are nevertheless covered in this section of the review. This section also considers ongoing 

regulatory developments relevant for the creation of a comprehensive macroprudential framework 

for the non-bank financial sector that are not directly related to the COVID-19 response. They 

include the finalisation of a recovery and resolution framework for CCPs and the review of the 

regulatory framework for the insurance sector (Solvency II). 

4.2 

CCPs 

CCPs demonstrated operational resilience during the market turmoil at the onset of the 
COVID pandemic, processing increased volumes of transactions and margins. CCPs are 
systemic risk managers, and as such can be sensitive to events such as the market turmoil at the 

onset of the COVID-19 pandemic described in Section 1.5. CCPs across Europe had to deal with 

increased volumes of transactions and of margins called and posted at a time when COVID-19 

restrictions created operational complexities. For example, Chart 4.2.A below shows the large 

increase in variation margins processed by all EU27 CCPs – both received from and paid out to 

clearing members – in response to the jump in market volatility. Despite these challenges, CCPs 

proved resilient in the absence of widespread defaults by clearing members. CCP supervisors 

closely monitored their performance during this time, and no material operational incidents occurred 

at CCPs.  

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Chart 4.2.A 

Daily variation margins (VMs) received and paid by EU27 CCPs 

CCPs proved resilient and were able to process increased volumes of margins during the market 

turmoil in March 2020 

(EUR billions (LHS); VSTOXX index level (RHS)) 

VM Received EU27 (left-hand scale)
VM Paid EU27 (left-hand scale)
VSTOXX (right-hand scale)

30

20

10

0

-10

-20

-30

85

65

45

25

5

-15

-35

-55

-75

01/19

03/19

05/19

07/19

09/19

11/19

01/20

03/20

05/20

07/20

09/20

11/20

Sources: ESRB trade repository data and VSTOXX public data plus ESRB Secretariat calculations. 
Notes: The chart shows the daily flows of VMs in EUR billions, i.e. the amount of VMs received by CCPs from their clearing 
members and the amount that CCPs paid (back) to their clearing members. 

Margin calls, however, added to the demand for highly liquid assets (notably cash), which 

put liquidity management strains on some users of clearing services, both members and 
clients. High volatility in asset prices resulted in large variation margin calls on centrally and 
bilaterally cleared derivative transactions. For example, the daily amount of variation margins called 

by EU27 central counterparties peaked at around €23 billion in March 2020 (Chart 4.2.A). While the 

regular exchange of variation margins prevented the build-up of uncollateralised exposures – a 

desired feature of the G20/FSB financial sector reforms following the global financial crisis – it 

added to the overall demand for cash. Initial margins, which are not meant to increase abruptly in 

response to higher volatility, also rose sharply, although the effects of market volatility and changes 

in portfolio composition and size are difficult to disentangle. During March 2020, for example, initial 
margins posted at EU CCPs increased by roughly €47 billion (see Chart 4.2.B below).161 The 

impact of the market stress and the resulting margin increases was distributed unevenly across 

different asset classes, mirroring differences in the volatility of the underlying assets: margins on 

equity futures, for instance, rose more strongly than those on interest rate swaps, the largest asset 

class. Overall, these developments put liquidity management strains on some clearing members 

and their clients.  

161   See also Liquidity risks arising from margin calls, ECB, June 2020. 

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Chart 4.2.B 

Initial margins (IMs) held at EU27 CCPs 

IMs also increased putting strains on liquidity management 

(EUR billions (LHS); VSTOXX index level (RHS)) 

IM (left-hand scale)
VSTOXX (right-hand scale)

130

120

110

100

90

80

70

60

50

40

90

80

70

60

50

40

30

20

10

0

01/19

03/19

05/19

07/19

09/19

11/19

01/20

03/20

05/20

07/20

09/20

11/20

Sources: ESRB trade repository data and VSTOXX public data plus ESRB Secretariat calculations. 
Notes: The chart shows the daily amount of IMs held at EU27 CCPs in EUR billions in relation to market volatility as expressed 
by the VSTOXX. 

Margin calls were also large in non-centrally cleared markets, although non-centrally cleared 

variation margin calls can also be met in non-cash collateral, which puts less pressure on 
liquidity. From a financial stability point of view, non-centrally cleared transactions are highly 
relevant since a large proportion of derivative transactions are cleared bilaterally. For example, an 
ECB study162 on investment funds with around two-thirds of their portfolios non-centrally cleared 
indicates that euro area funds faced a fivefold increase in variation margins during the height of the 

COVID-19-related market stress. Some of these funds met these margin calls by engaging in repo 

transactions, selling assets and drawing on credit lines. 

In response to these developments, the ESRB issued two recommendations pertaining to 
CCPs. The first recommendation is designed to increase the resilience of CCPs against non-default 
losses that might arise from, for example, the materialisation of operational risk. In contrast to 

default losses, which are mostly mutualised across clearing members, with a small contribution by 

the CCP itself in the form of “skin in the game”, such non-default losses must in principle be met by 

CCPs alone from their own resources. Although CCPs demonstrated operational resilience during 

the market turmoil early in the year, the ESRB deemed it prudent in recognition of their systemic 

importance that CCPs maintain additional own resources to be better able to meet non-default 

losses that might arise. Reflecting this, the ESRB included CCPs in the scope of its 

recommendation on restriction of distributions during the COVID-19 pandemic (see Box 2 in 

Section 2.2). The second recommendation on liquidity risks arising from margin calls is designed to 

mitigate the adverse impact margin calls might have on both bank and non-bank entities (see Box 4 

below). The ESRB has published two reports in recent years setting out these impacts and related 

162  See Special Feature in the May 2020 ECB Financial Stability Review. 

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policy options.163 The unprecedented margin calls during the market turmoil at the onset of the 

COVID-19 pandemic provided further evidence that action in this area was needed.  

CCP supervisors responded to the ESRB recommendation on distribution restrictions. To 
ensure compliance with its recommendations, the ESRB assesses the responses from addressees 

of its recommendations and compiles a compliance report. At the time of writing, the compliance 

report was in the process of being finalised.  

CCP supervisors also responded to the ESRB recommendation on liquidity risk arising from 
margin calls. The ESRB is evaluating the responses received and discussing any follow-up with 
the respondents. It expects to submit the compliance report to the European Council, Commission 

and Parliament in Q2 2021.  

Box 4   
ESRB recommendation on liquidity risks arising from margin calls164 

Recommendation ESRB/2020/6 addressed to the competent authorities in the area of CCPs, banks 

and other relevant market participants contains four sub-recommendations in total: 

Recommendation A – Limiting cliff effects in relation to the demand for collateral 

Subject to being compatible with the overarching objective of avoiding jeopardising the resilience of 

counterparties, the recommendation is designed to limit sudden and significant (hence procyclical) 

changes and cliff effects in initial margins (including margin add-ons) and in collateral practices: (i) 

by CCPs vis-à-vis members; (ii) by clearing members vis-à-vis their clients; and (iii) in the bilateral 

market, resulting from the mechanical use of external credit ratings in margin models and possibly 

procyclical internal credit scoring methodologies. 

Recommendation B – Stress scenario for the assessment of future liquidity needs 

The recommendation is designed to enhance the liquidity resilience of CCPs by considering risks 

from the systemic, macroprudential perspective related to the high degree of interconnectedness 

among CCPs and their liquidity service providers. To this end, it recommends including in CCPs’ 

liquidity stress tests any two defaulting entities regardless of their role vis-à-vis the CCP, including 

important liquidity providers to the CCP. It also proposes to consider conducting coordinated 

liquidity stress tests at the EU and/or global level. 

Recommendation C – Limiting liquidity constraints related to margin collection 

Subject to being compatible with CCPs’ operational and financial resilience, the recommendation is 

designed to limit unnecessary liquidity constraints for clearing members and clients related to 

operational processes for margin collection. 

163   ESRB reports on margins and haircuts can be found at the following links:  

https://www.esrb.europa.eu/pub/pdf/reports/esrb.report_200109_mitigating_procyclicality_margins_haricuts~0f3e9
f9e48.en.pdf and 
https://www.esrb.europa.eu/pub/pdf/reports/170216_macroprudential_use_of_margins_and_haircuts.en.pdf.  

164   Recommendation ESRB/2020/6.  

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Recommendation D – Mitigation of procyclicality in the provision of client clearing 
services and in securities financing transactions 

It is recommended that European authorities steer discussions at international level, through the 

participation of relevant competent authorities in international fora and standard-setting bodies, 

where applicable, on means to mitigate the procyclicality in margin and haircut practices when 

providing client clearing services. These discussions should pursue the feasibility assessment, as 

well as the design. 

Several policy developments not directly related to the COVID-19 pandemic that were 
relevant for CCPs also took place. These include the completion of the legislative process for a 
European CCP recovery and resolution framework, the work carried out by ESMA on the scope of 

the clearing obligation for post-trade risk reduction services and for pension scheme arrangements, 

as well as policy measures by the European Commission and ESMA to mitigate the effects of 

Brexit.  

EU co-legislators agreed a recovery and resolution framework for CCPs, which has 

important ramifications in terms of tail risk mitigation and the stability of the financial 
system.165 Following a legislative proposal by the European Commission in 2016 on a framework 
for the recovery and resolution of CCPs, the EU Parliament and the Council agreed in June 2020 

on the final compromise text of the CCP recovery and resolution regulation, which was published in 
January 2021. EMIR166 prescribes mandatory minimum resilience standards for CCPs in the event 

of losses from defaulting clearing members, namely that CCPs should withstand the synchronous 

default of the largest two clearing members under extreme but plausible circumstances. However, 

EMIR does not address events that go beyond these tolerances. The recovery and resolution 

regulation closes this gap by setting out a legally implementable and predictable process to allocate 

losses beyond the regular CCP default management waterfall that preserves the CCP’s critical 

functions. The framework also addresses the handling of non-default losses. 

ESMA reports on post-trade risk reduction services and on pension scheme arrangements 
supporting a broad application of the clearing obligation. Regarding trades originating from 
post-trade risk reduction (PTRR) services ESMA concludes167 that PTRR services, primarily 
compression and optimisation/rebalancing, are useful tools to manage risk in both cleared and 

uncleared portfolios and that there are therefore benefits of allowing certain PTRR transactions to 

be exempted from the clearing obligation. The report, however, notes that any such exemption 

should be limited and subject to certain requirements, to reduce any risk of circumvention of the 
clearing obligation. Regarding pension scheme arrangements (PSAs)168, ESMA concludes that 

while there is insufficient time to introduce operational changes and/or regulatory adjustments to 

165   Regulation (EU) 2021/23 of the European Parliament and of the Council of 16 December 2020 on a framework for the 

recovery and resolution of central counterparties and amending Regulations (EU) No 1095/2010, (EU) No 648/2012, (EU) 
No 600/2014, (EU) No 806/2014 and (EU) 2015/2365 and Directives 2002/47/EC, 2004/25/EC, 2007/36/EC, 2014/59/EU 
and (EU) 2017/1132 (OJ L 22, 22.1.2021, p. 1). 

166   Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central 

counterparties and trade repositories Text with EEA relevance (OJ L 201, 27.7.2012, p. 1).  

167   ESMA  report  to  the  European  Commission:  Report  on  post  trade  risk  reduction  services  with  regards  to  the 

clearing obligation (EMIR Article 85(3a)). 

168   ESMA  report  to  the  European  Commission:  Report  on  the  Central  Clearing  Obligations  for  pension  scheme 

arrangements   

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safely remove the current exemption elapsing in June 2021, all efforts should be made to avoid a 

further extension of the temporary exemption beyond June 2022. 

ESMA also set up the CCP Supervisory Committee, which is charged with preparing 

decisions for the recognition and supervision of third-country CCPs providing services in 
the European Union. The CCP Supervisory Committee was introduced by the so-called EMIR 2.2 
regulation.169 It is an ESMA committee charged with preparing decisions for the ESMA Board of 

Supervisors pertaining to the recognition and supervision of third-country CCPs providing services 

in the European Union. The Committee became operational in the second half of 2020 and – in the 

context of the United Kingdom’s exit from the European Union – processed a temporary recognition 

and related tiering of three UK CCPs. The CCP Supervisory Committee is also engaged in the 

supervision of EU CCPs with a view to harmonising existing EMIR supervision. ESMA also set up a 

CCP Policy Committee to work on CCP policy-related issues. 

4.3 

Insurance 

The market turmoil at the onset of the COVID-19 pandemic weakened insurers’ solvency 
positions, both via the fall in asset prices and via lower risk-free rates. Insurers are exposed 
to several risks, specifically underwriting and market risks related to their investments. Market risks 

comprise interest rate, credit, equity, real estate, foreign exchange and concentration risks. These 

risks as well as operational risks are considered when calculating own fund requirements under the 
prudential rules for insurance (Solvency II).170 The Solvency II framework computes insurers’ 

solvency positions on a mark-to-market basis. This means that both assets and liabilities are 

recorded at market values in insurers’ balance sheets. The fall in asset prices at the onset of the 

COVID-19 pandemic (see Section 1.5) therefore led to a deterioration in capital ratios. In addition, 

record-low swap rates weighed on insurers’ capital positions owing to the fact that these rates were 

used to calculate the risk-free interest rate term structure necessary to discount liabilities and 

determine technical provisions. Reflecting the fall in asset prices and lower risk-free interest rates, 

the median solvency position had decreased to 203% by the end of Q1 2020 compared to 213% at 

the end of 2019 (see Chart 4.3.A). 

169   Regulation (EU) 2019/2099 of the European Parliament and of the Council of 23 October 2019 amending Regulation 
(EU)  No  648/2012  as  regards  the  procedures  and  authorities  involved  for  the  authorisation  of  CCPs  and 
requirements for the recognition of third-country CCPs. 

170   Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of 

the business of Insurance and Reinsurance (Solvency II) (OJ L 335, 17.12.2009, p. 1) and Commission Delegated 
Regulation (EU) 2015/35. 

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Chart 4.3.A 

Average distribution of SCR ratios 

Reflecting the fall in asset prices and lower risk-free interest rates, the median solvency position fell 

to 203% by the end of Q1 2020 compared to 213% at the end of 2019 

450%

400%

350%

300%

250%

200%

150%

100%

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

2016

2017

2018

2019

2020

Source: EIOPA insurance statistics. 
Notes: Average distribution of solo insurers’ solvency capital requirement (SCR) ratios in EU27 countries. SCR ratios represent 
the own funds divided by the SCR. The yellow bar shows SCR ratios between the 1st quartile (lowest 25% of SCR ratios) and 
the median. The red bar shows SCR ratios between the median and the 3rd quartile (51% to 75% of highest SCR ratios). 
Outliers show the 10th and 90th percentile of SCR ratios. 

Several countercyclical mechanisms built into Solvency II to dampen the effects of low 

interest rates and volatile capital markets had the desired effect on regulatory solvency 
ratios during the market turmoil in March 2020. These countercyclical LTG measures had 
different usages across countries, and had the largest impact on aggregated SCR ratios in 

Germany, Portugal and the Netherlands (see Chart 4.3.B). They include the volatility adjustment for 
credit spread risk171 and the symmetric adjustment for equity risk172. In Austria, Belgium and the 

Netherlands, the impact of the volatility adjustment overshot in the crisis, as the benefit on the level 

of liabilities was higher than the reduction of assets. This led to the solvency position of some 
insurers ending up higher in Q1 2020 than in Q4 2019.173 

171   The volatility adjustment adds a spread to the risk-free rate used to compute the present value of insurers’ liabilities. The 

idea is to dampen the impact of volatile credit spreads on insurers’ balance sheets and hence solvency. 

172   The symmetric equity risk adjustment reduces (increases) the solvency capital requirement for equity investments by max. 

10 percentage points when the aggregate equity index composed of 11 country indices (CH, DE, ES, FR, IT, JP, NL, PL, 
SE, UK, US) falls below (rises above) its three-year average plus 8%.  

173   The VA overshooting effect is considered in EIOPA’s technical advice to the European Commission to review the VA 
methodology (see Chapter 4.X in Opinion on the 2020 Review of Solvency II, EIOPA,, 17 December 2020). 

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Chart 4.3.B 

Average weighted SCR ratios 

Countercyclical LTG measures had different usages across countries, and had the largest 

aggregated impact in Germany, Portugal and the Netherlands 

(y-axis: SCR ratio) 

Without LTG measures
LTG measures

350%

300%

250%

200%

150%

100%

DE

MT

DK

FR

AT

SE

ES

IT

CZ

FI

HU

BE

LU

BG

SK

NL

IE

GR

PT

Source: EIOPA report on long-term guarantee measures and measures on equity risk in 2020. 
Notes: Solo insurers’ average weighted SCR ratios per country as of 31 December 2019 represent the sum of all undertakings’ 
SCR-weighted own funds divided by the SCR; the LTG measures refer to the average impact of the sum of the matching 
adjustment, the volatility adjustment and the transitional measures. 

In addition to these countercyclical mechanisms, transitional measures174 allowing insurers 
to phase in the balance sheet impact of market-based discount rates dampened the impact 
of the fall in swap rates on solvency ratios. In Germany and Portugal, some insurers that had 
not previously applied these measures requested their supervisors to authorise their use following 

the market turmoil in March. In Germany, three undertakings applied for transitional measures and 

14 for the volatility adjustment following the onset of the COVID-19 pandemic. Five firms were 
granted approval with a short retrospective effect.175 Supervisors in Portugal granted two new 

authorisations to use transitional measures.  

The pandemic also adversely affected the liquidity positions of insurers. The traditional 
business model of insurers usually shields them from liquidity risks since they receive premiums 

before paying claims. However, liquidity tensions can still occur as a result of certain activities such 

as, for example, margin calls from derivatives. As households and businesses needed money to 

meet other expenses during the pandemic, insurers in some countries saw cancellations of policies 

increase, policies with short maturities not being renewed and moratoria on premiums incepted as 

a support measure, all leading to a reduction in inflows of premiums. This meant that when they 

had to pay claims, they may not always have been able to do so using the cash inflows from 

premiums alone. Instead, they may have had to look for other sources of liquidity, such as not 

rolling over maturing fixed income assets and/or selling assets, including liquid assets held for such 

174   The transitional measure phases in the difference between the (higher) value of the liabilities calculated under the market-

based Solvency II regime and their value under Solvency I. This phasing-in period lasts until 31 December 2031.  

175   See COVID-19 situation: BaFin information on new developments and key points, Bundesanstalt für 

Finanzdienstleistungsaufsicht, update on 21 September 2020.  

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situations. In three countries (PT, FR, ES), net cash flows excluding investment income declined by 

more than 10% in H1 2020 as compared to H1 2019 (see Chart 4.3.C).  

Chart 4.3.C 

Cash outflows vs inflows, excluding investment income 
In Portugal, France and Spain, net cash flows declined by more than 10% in H1 2020 compared to 

H1 2019 

H1 2018
H1 2019
H1 2020

150%

125%

100%

75%

50%

25%

0%

PT BE AT FI NL ES FR HR PL SI RO DK IE CY CZ DE SK MT HU LT LV IT GR BG EE LU SE

Source: EIOPA insurance statistics. 
Notes: The ratio relates aggregated net claims and total expenses to net premiums earned for solo life and non-life insurers. 
The ratio shows information about insurers’ net cash flows excluding investment income. To account for the seasonality of 
premium income in Q4, H1 data are compared for the years 2018 to 2020. A ratio exceeding 100% indicates that net claims and 
total expenses in the period exceeded net premiums earned. 

In addition, and due to market volatility, there were exceptionally large margin calls on 
derivative positions held by insurers and IORPs. Between 11 and 23 March 2020, euro area 
insurers and IORPs had to post variation margins of almost €50 billion, with 90% of this amount 
originating from Dutch entities.176 The amount corresponds to approximately 2% of total assets 
managed by Dutch IORPs and insurers177, but might mask larger exposures of individual entities. 
The ensuing need for liquidity to meet these margin calls took place at a time when market liquidity 

in certain asset classes, such as commercial paper and corporate bond markets, was low. The 

strong correlation between outflows from MMFs held by insurers and IORPs and their variation 

margin payments points to the intricate ways in which shocks may travel through the financial 

system. 

In response to these developments, the ESRB included insurers in the scope of its 
recommendation on restriction of distributions. As the pandemic unfolded, certain insurers that 
provided business interruption insurance via contracts that did not explicitly exclude pandemic 

events faced additional losses. The ESRB also saw a risk that a common de-risking strategy, such 

as the sale of higher-yield corporate bonds, could create procyclical dynamics. Reflecting this, and 

the possibility that concerns about stigma effects might result in insurers not practising enough self-

restraint, the ESRB included insurers in the scope of its recommendation on restriction of 

176   See Section 4.1 and Financial Stability Review, Box 8, ECB, November 2020.  
177   See EIOPA insurance statistics for solo insurers as of Q4 2019 and Financial Stability Report, EIOPA, July 2020, p. 44.  

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distributions during the COVID-19 pandemic (see Box 2 in Section 2.2). This recommendation 

echoed an earlier statement by EIOPA, which had urged insurers to temporarily suspend all 
discretionary dividend distributions and share buybacks.178 However, also in view of the absence of 

legal powers for supervisors to enforce the distribution restrictions recommended by the ESRB, 

some national authorities took the view that a blanket approach was not warranted and that they 
would evaluate restrictions to distributions on a case-by-case basis.179 Accordingly, several 

insurance groups distributed dividends. For a coordinated approach in the future, EIOPA and the 

ESRB suggested to the European Commission to grant supervisory authorities the power to restrict 

dividends in exceptional circumstances as a macroprudential tool in the 2020 review of 
Solvency II.180 

The ESRB also sent a letter to EIOPA pointing to the need for better data and provisions in 
Solvency II pertaining to insurers’ liquidity positions. The letter to EIOPA (see Box 5)181 
pointed to the lack of consistent data for assessing liquidity risks in the insurance sector and was 

designed to alert EIOPA and its members to the need to promptly operationalise the liquidity 

monitoring framework they were in the process of developing. The letter also noted that the Pillar 2 

provisions for risk management in Solvency II would need to be enhanced so that insurance 

supervisors had a firm legal basis to require those insurers with a vulnerable liquidity profile to hold 
more liquid assets.182 In a statement183, EIOPA supported the ESRB’s call on the need for 

enhanced monitoring and put in place a reporting framework to collect consistent information on 

liquidity risks at EU level. In addition, EIOPA intensified its work in the area of liquidity stress 

testing, and it is envisaged that the 2021 EIOPA insurance stress test will include a liquidity 

component. 

Box 5   
ESRB letter to EIOPA on liquidity risks in the insurance sector 

The letter sent on 8 June 2020 highlighted the fact that certain insurance products, such as unit-

linked products, allowed investors to redeem their funds at short notice, while the underlying assets 

could be structurally illiquid or suddenly become so. While a crystallisation of liquidity risks in the 

insurance sector could affect financial stability, there was a lack of consistent data for assessing the 

magnitude of potential liquidity risks in the insurance sector. In this context, EIOPA developed and 

put in place a proportionate framework to enhance the nature and consistency of the information 

collected on liquidity risks. This reporting framework categorises insurance obligations according to 

their liquidity (i.e. the probability of policyholders redeeming their funds) and compares these with 

178   EIOPA urges (re)insurers to temporarily suspend all discretionary dividend distributions and share buy backs, 

EIOPA, 2 April 2020.  

179   See, for example, Corona-Virus: EIOPA äußert sich zu Dividenden , Bundesanstalt für Finanzdienstleistungsaufsicht, 2 

April 2020, and DNB resumes assessment of insurers’ dividends, De Nederlandsche Bank, 6 July 2020.  

180   See Chapter 11.2. in Opinion on the 2020 Review of Solvency II, EIOPA, 17 December 2020, and Response letter to a 

consultation of the European Commission on the review of Solvency II, ESRB, 16 October 2020. 

181  ESRB letter to EIOPA on liquidity risks in the insurance sector, ESRB, June 2020.  
182   The Solvency II framework is divided into three pillars: Pillar 1 sets out quantitative requirements for technical provisions, 
Pillar 2 sets out requirements for risk management and governance, and Pillar 3 sets out requirements for reporting; see 
also European Commission overview.  

183   See EIOPA supports the ESRB’s call on enhanced monitoring of liquidity risks in the insurance sector, EIOPA, 9 

June 2020. 

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high-quality liquid assets held by insurers. In addition, it also relates inflows to outflows over short 
periods of time.184 

The COVID-19 developments also informed the input of the ESRB and of EIOPA to the 

Solvency II review, with both institutions calling for the introduction of a macroprudential 
framework for insurance. In addition to the possibility of restricting or suspending dividends or 
other payments to shareholders, EIOPA’s opinion185 suggests introducing new discretionary tools 

with a macroprudential dimension in Solvency II. On liquidity, EIOPA suggests providing 

supervisors with the power to act if they have identified liquidity risks, which may encompass a 

temporary freeze of redemption rights as a last resort. Regarding capital-based tools, EIOPA 

proposes to introduce the power for supervisors to impose a capital surcharge for systemic risk. In 
addition, EIOPA advises on several amendments to the LTG package.186 These include a new 

extrapolation technique to better reflect current market conditions and new specifications for the 

volatility adjustment to better account for the duration mismatch between assets and liabilities and 
the predictability of cash flows. The ESRB’s response187 to the consultation by the European 

Commission mirrored many of the suggestions by EIOPA and, in addition, proposed to make the 

volatility adjustment symmetric, so that insurers build reserves in good times when credit spreads 

are compressed, which can then be released when spreads reverse. 

4.4 

Investment funds 

At the onset of the COVID-19 pandemic, some open-ended investment funds faced high 

investor redemptions amid the large deterioration in market liquidity described in Section 
1.5. This combination of investor redemptions and deteriorating market liquidity of the assets held 
by investment funds primarily affected corporate bond funds and MMFs. For example, during the 

period of high market volatility in late February and early March, redemptions from high-yield 

corporate bond funds reached 10% of assets under management (AUM). Certain MMFs were 

subject to large redemptions, including EU-domiciled, US dollar-denominated low-volatility net 

asset value (LVNAV) MMFs (28% of AUM) and euro-denominated variable net asset value (VNAV) 
MMFs (13% of AUM).188 The strong outflows from LVNAV and VNAV MMFs caused some funds to 

breach their liquid asset holding requirements, increasing the likelihood of fund managers making 

use of redemption fees and gates. The need to sell assets in illiquid markets to meet investor 

redemptions may have further deteriorated liquidity and amplified volatility in certain markets. 

Market conditions eased following extraordinary asset purchases by central banks, including the 

ECB’s non-standard monetary policy measures and the US Federal Reserve’s Money Market 

Mutual Fund Liquidity Facility. 

184   See Financial Stability Report, EIOPA, December 2020. 
185   See Opinion on the 2020 Review of Solvency II, EIOPA, 17 December 2020.  
186   The objective of the LTG measures is to align the market-based, short-term valuations in Solvency II with the long-term 
guarantees of insurers. The LTG measures are the extrapolation of risk-free interest rates, the matching adjustment, the 
volatility adjustment, the extension of the recovery period in case of non-compliance with the Solvency Capital 
Requirement, the transitional measure on the risk-free interest rates and the transitional measure on technical provisions; 
see the corresponding EIOPA report. 

187   Response to a consultation of the European Commission on the review of Solvency II, ESRB, October 2020. For 

more details, see also the ESRB Annual Report 2020 (forthcoming). 

188   See EU Non-bank Financial Intermediation Risk Monitor 2020, ESRB, October 2020. 

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Some asset managers used liquidity management tools (LMTs) during the high levels of 
market volatility. These included the use of redemption gates, swing pricing and fund 
suspensions. In some cases, NCAs also issued statements on the use of LMTs, including on the 
use of swing pricing.189 Suspensions of funds governed by the undertakings for collective 
investment in transferable securities (UCITS) directive190 mainly related to bond funds exposed to 

corporate debt. These suspensions were widespread, covering around 200 EU and UK funds, but 

mostly short-lived; the total amount of net asset value (NAV) affected fell from around €22 billion in 
March to around €0.4 billion by end-June.191 On the contrary, suspensions of alternative investment 

funds (AIFs) increased to a total NAV amount of around €40 billion by end-June. The greater 

persistence of suspensions in AIFs compared to UCITS largely reflects the fact that several EU27 

and UK AIFs that offer short redemption notice periods to investors, while investing in illiquid real 

estate assets, faced difficulties in valuing these assets and therefore remained suspended. By the 

end of 2020, the suspensions amounted to €3.8 billion, also following the reopening of certain UK 

real estate funds for which the material valuation uncertainty had ended. 

Some MMFs investing in private sector debt securities faced acute liquidity strains in March 
2020, which led ESMA to publish a statement on external support. These liquidity strains arose 
when non-public debt MMFs experienced large redemptions from investors, combined with a lack 

of liquidity in private debt money markets. In the light of these liquidity challenges, ESMA issued a 

statement to clarify the meaning of Article 35 of the EU Money Market Fund Regulation in the 

context of the conditions under which MMFs may enter into transactions with affiliated or related 
parties.192 

The ESRB also acted and issued a public statement and a recommendation pertaining to 
liquidity management by asset managers. The statement193 aims at guarding against the 
adverse system-wide effects stemming from fire-sale dynamics across the financial system. In it, 

the ESRB supported and encouraged the timely use of LMTs by asset managers, while also noting 

that LMTs are not available to all fund managers across the EU. In particular, the ESRB underlined 

that the timely use of LMTs helps reduce the risk of forced sales, particularly of less liquid assets in 
periods of stress. The recommendation194 was designed to enhance the preparedness of 

investment funds in case of future adverse shocks that could lead to a deterioration in financial 

market liquidity, resulting in potential adverse implications for financial stability conditions in the 

European Union. In it, the ESRB recommended that ESMA coordinates a supervisory exercise with 

its members in order to assess funds’ preparedness. The analysis focused on funds with significant 

exposures to corporate debt and real estate assets as these assets tended to be less liquid and – 

in the case of real estate – were subject to valuation uncertainty. The recommendation particularly 

noted the risk of spillover effects on other financial institutions that have exposures to these assets 

189   See FAQ CSSF – Swing Pricing Mechanism, Commission de Surveillance du Secteur Financier, March 2020. 
190   Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, 

regulations and administrative provisions relating to undertakings for collective investment in transferable securities 
(UCITS) (OJ L 302, 17.11.2009, p. 32). 

191   ESMA Report on Trends, Risks and Vulnerabilities, No 2, ESMA, September 2020. 
192   See Public Statement: Actions to mitigate the impact of COVID-19 on the EU financial markets – External support 

within the meaning of Article 35 of the MMF Regulation, ESMA, 9 July 2020. 

193   Use of liquidity management tools by investment funds with exposures to less liquid assets, ESRB, May 2020. 
194   See Recommendation ESRB 2020/4. 

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– such as insurance companies, pension funds or banks – as well as possible adverse impacts on 

the cost and availability of market-based financing for NFCs.  

In response to the ESRB’s recommendation, ESMA coordinated a supervisory exercise with 
a focus on investment funds exposed to corporate debt and real estate assets.195 The 
supervisory exercise included NCAs collecting data on investment funds exposed to these asset 

classes. ESMA’s assessment focused on potential future redemptions and/or valuation uncertainty 

shocks and considered whether additional actions were needed to foster the asset manager 

industry’s preparedness. Results showed that, in general, corporate debt and real estate funds 

were able to maintain their activities when faced with redemption pressure and valuation 

uncertainty. Funds were also broadly able to keep their portfolio structure constant. This was 

supported by the redemption shock lasting a short period of time and against the backdrop of 

unprecedented monetary and fiscal support measures.  

The supervisory exercise helped ESMA identify five priority areas to enhance the 
preparedness of investment funds for future market stress. The supervisory exercise showed 
that some funds presented potential liquidity mismatches due to their liquidity setup which, in some 

cases, combined investments in illiquid assets with high redemption frequencies, no/short notice 

periods and a lack of appropriate LMTs. It also showed that only few funds had adjusted their 

liquidity risk management processes in the light of the liquidity issues encountered. Concerns 

around the valuation of portfolio assets were also evident – especially for real estate funds, where 

42% of AUM were declared to be affected by material distortions in incoming cash flows such as 

rental income defaults. Reflecting these findings, ESMA identified five priority areas to help 

investment funds be better prepared to deal with market stress in future: (i) continued supervision 

to ensure alignment between investment funds’ investment strategy, liquidity profile and redemption 

policy; (ii) closer supervision of investment funds’ liquidity risk assessments, including liquidity 

stress testing; (iii) additional specifications on how liquidity profiles should be reported under the 
Alternative Investment Fund Managers Directive (AIFMD)196; (iv) the need for the availability of a 

common set of LMTs for fund managers in both UCITS and AIFs; and (v) further supervisory work 

to ensure that management companies’ valuation procedures cover all market situations, including 

valuation approaches for stressed market conditions. 

Reflecting the strains in the MMF sector, regulators at EU and international level are 
assessing vulnerabilities and are considering reforms to increase resilience to future crises. 
ESMA published updated guidelines on stress tests for MMFs, including modifications of the risk 
parameters, to take account of MMFs’ experience during the COVID-19 crisis (see Section 2.3).197 

Authorities at global and EU level, including the ESRB, started to discuss what reforms might be 

needed to increase the resilience of MMFs and reduce the risk of future stress in this sector. In this 

context, ESMA published a consultation document in April 2021 on the potential need for the review 
of the MMF Regulation.198 At international level, the FSB in its holistic review report199 pledged to 

195   ESMA Report on Recommendation of the European Systemic Risk Board on liquidity risk in investment funds, 

ESMA, 12 November 2020. 

196   Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund 
Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 
1095/2010 (OJ L 174 1.7.2011, p. 1). 

197   See ESMA updates guidelines on stress tests for money market funds, ESMA, December 2020. 
198   See Consultation on EU money market fund regulation – legislative review, ESMA, March 2021. 
199   See Holistic Review of the March Market Turmoil, Financial Stability Board, November 2020.  

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further examine liquidity risks, core functions and aspects of the structure or regulations in non-

government MMFs. The FSB started to assess policy options in early 2021. The International 
Organization of Securities Commissions (IOSCO) published a report200 analysing the events that 
occurred in the MMF sector in March 2020 and a thematic review201 assessing the implementation 
of selected IOSCO recommendations issued in 2012 to strengthen the resilience of MMFs globally. 

In the EU, the ESRB will form a view in 2021, also with the aim of informing the upcoming review of 

the MMFR. 

Beyond the response to the COVID-19 pandemic, the ESRB’s 2017 recommendation on 
liquidity and leverage risks in investment funds continues to be implemented. Specific 
recommendations therein were addressed to ESMA and to the European Commission. In 
response, ESMA published guidelines on liquidity stress testing in UCITS and AIFs in 2019202, as 
well as a public consultation203 and a report204 in 2020 to outline guidelines on setting leverage 

limits under Article 25 of the AIFMD. The review of the AIFMD provides an opportunity to address 

parts of the 2017 recommendation that had not been acted upon by the end-2020 reporting 

deadline. This includes a recommendation that the Commission should propose EU legislation to 

ensure that a consistent set of LMTs is available to fund managers across all EU jurisdictions.  

The ESRB responded to the public consultation of the AIFMD review in January 2021.205 
Some enhancements to the current framework were outlined covering (i) the suitability of the 

reporting framework and access to data for monitoring systemic risks, (ii) the need to operationalise 

existing macroprudential policy instruments, and (iii) the ongoing development of the 

macroprudential policy framework for investment funds. Clarification is also needed on the 

conditions under which certain tools can be used. For example, NCAs can suspend dealings in 

both UCITS and AIFs when this is deemed in the interest of unit holders or in the interest of the 

public. During 2020, the French supervisory authority (Autorité des Marchés Financiers) used this 
tool for UCITS (Article 84(2b)) for microprudential reasons and in the interest of unit holders.206 

Similar provisions are available for AIFs under Article 46(j) of the AIFMD, and to facilitate the use of 

this tool from a macroprudential perspective, it would help to clarify under what circumstances it 

can be used in the interest of the public. 

200   See Thematic Note: Money Market Funds during the March-April Episode, International Organization of Securities 

Commissions, November 2020. 

201   See Thematic Review on consistency in implementation of Money Market Funds reforms, International Organization 

of Securities Commissions, November 2020. 

202   See Guidelines on liquidity stress testing in UCITS and AIFs, ESMA, September 2019. 
203   See Consultation on guidance to address leverage risk in the AIF sector, ESMA, March 2020. 
204   See Final Report: Guidelines on Article 25 of Directive 2011/61/EU, ESMA, December 2020. 
205   See ESRB response to the European Commission consultation on the review of AIFMD, ESRB, January 2021. 
206   The AMF requested the suspension of subscriptions and redemptions of units for three French-domiciled UCITS funds 
managed by the UK-based asset management company H2O Asset Management LLP. The asset manager extended 
suspensions to other French-domiciled UCITS and one AIF. See the corresponding press release by the AMF.. 

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Annex 1: Material third countries 

Table A1.1 

Exposures of the EU banking sector to third countries 

(percentage of respective total exposures of the EU banking sector) 

Original exposures 

Risk-weighted exposures 

Exposures in default 

Third 
country 

Q4  
2019 

Q3 
2019 

Last  
8Q 

Last  
12Q 

Q4  
2019 

Q3  
2019 

Last  
8Q 

Last  
12Q 

Q4  
2019 

Q3  
2019 

Last  
8Q 

Last  
12Q 

Materiality 

US 

HK 

SG 

CH 

CN 

MX 

BR 

TR 

KY 

RU 

7.40%  7.74%  7.54%  7.62%  6.84%  7.26%  7.04%  7.08%  2.31%  2.12%  1.91%  1.91%  Confirmed 

2.69%  2.75%  2.60%  2.54%  1.90%  1.93%  1.87%  1.81%  0.24%  0.24%  0.28%  0.27%  Confirmed 

1.01%  1.02%  0.97%  0.96%  0.78%  0.80%  0.76%  0.75%  0.38%  0.42%  0.37%  0.34% 

Retained 

1.01%  1.00%  0.99%  0.99%  0.65%  0.68%  0.64%  0.65%  0.39%  0.37%  0.38%  0.35%  Retained* 

0.90%  0.89%  0.87%  0.86%  1.33%  1.33%  1.34%  1.36%  0.12%  0.11%  0.11%  0.12%  Confirmed 

0.85%  0.86%  0.84%  0.84%  1.21%  1.14%  1.12%  1.12%  0.55%  0.50%  0.45%  0.43%  Confirmed 

0.77%  0.74%  0.74%  0.77%  1.11%  1.06%  1.05%  1.12%  1.41%  1.27%  1.21%  1.19%  Confirmed 

0.63%  0.68%  0.72%  0.79%  1.08%  1.12%  1.18%  1.29%  1.12%  1.17%  0.88%  0.79%  Confirmed 

0.60%  0.63%  0.61%  0.63%  1.06%  1.05%  1.06%  1.06%  0.18%  0.19%  0.21%  0.21% 

Not 
identified* 

0.46%  0.45%  0.43%  0.43%  0.59%  0.58%  0.54%  0.56%  0.37%  0.40%  0.41%  0.43%  Retained* 

Sources: EBA, ESRB calculations. 
Notes: The table shows the original credit exposures of the EU banking sector vis-à-vis the real economy of the third countries 
to which the EU banking sector has the largest exposures as a percentage of respective total original credit exposures of the EU 
banking sector vis-à-vis the real economy. Third countries are ranked according to original credit exposures to the real economy 
in Q4 2017. Numbers above the 1% threshold for identification established by Decision ESRB/2015/3 are highlighted in orange. 
Numbers below the 1% threshold for deletion established by Decision ESRB/2015/3 are highlighted in green. Materiality 
assessments marked with an asterisk (*) indicate the use of discretion to retain (RU, CH) or not add (KY) a country on/to the list 
of material third countries even though the criteria for deletion/inclusion were fulfilled. 

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Annex 1: Material third countries 

119 

 
 
 
 
 
 
 
 
 
 
 
Table A.1.2 
Methodologies used by EEA countries207 to identify material third countries 

EEA 
country 

ESRB methodology 

Calculation  Threshold 

Data 

Latest 
data 

Comments 

AT 

BE 

BG 

CY 

CZ 

DE 

DK 

EE 

ES 

FI 

FR 

GR 

HR 

HU 

IE 

IT 

LI 

LT 

LU 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q4 2019 

Decision not to cover the entire banking sector 
exposures. Statistical approach overlaid with expert 
judgement 

 

Q4 2019 

Statistical approach overlaid with expert judgement. 
Decision not to include Row 100 “Exposures in default” 
of Template C 09.01 

 

 

 

 

 

 

 

 

 

 

 

Q4 2019 

Use of COREP data items providing larger coverage: 
total amount of the exposures to individual countries, 
including intragroup exposures, is used 

Q4 2019 

Statistical approach overlaid with expert judgement 

Q4 2019 

Statistical approach overlaid with expert judgement 

Q4 2019 

Combination with external position data using a 3% 
threshold  

Q4 2019 

Use of 2% threshold; statistical approach overlaid with 
expert judgement 

Q4 2019 

Statistical approach overlaid with expert judgement 

Q4 2019 

Use of additional COREP data items providing a larger 
coverage 

Q4 2019 

Statistical approach overlaid with expert judgement 

Q4 2019 

Statistical approach overlaid with expert judgement 

Q4 2019 

Combination of ESRB metrics with additional proxies 
accounting for the foreign presence of significant Greek 
banks 

Q4 2019 

Combination with analysis of unconsolidated risk-
weighted exposures for the private sector 

 

Q1 2020 

Use of additional COREP templates C 09.04 providing a 
larger sample of Hungarian banks; alternative proxy to 
ESRB metrics used, i.e. own funds requirements; 
statistical approach overlaid with expert judgement 

 

 

 

 

 

Q4 2019 

Use of additional COREP templates including C 07.00 
and C 08.01. Statistical approach overlaid with expert 
judgement 

Q4 2019 

Statistical approach overlaid with expert judgement 

Q4 2019 

Use of 2% threshold; statistical approach overlaid with 
expert judgement 

Q4 2019 

Statistical approach overlaid with expert judgement 

Q4 2019 

Statistical approach overlaid with expert judgement 

207   The AMF requested the suspension of subscriptions and redemptions of units for three French-domiciled UCITS funds 
managed by the UK-based asset management company H2O Asset Management LLP. The asset manager extended 
suspensions to other French-domiciled UCITS and one AIF. See the corresponding press release by the AMF.. 

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Annex 1: Material third countries 

120 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EEA 
country 

ESRB methodology 

Calculation  Threshold 

Data 

LV 

MT 

NL 

PL 

PT 

RO 

SE 

SI 

SK 

ECB 

NO 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Latest 
data 

Q1 2020 

Comments 

Use of 2% threshold; decision not to use defaulted 
exposures. Decision not to include Column 020 of 
Template C 09.01 and Column 030 of Template C 09.02 

Q4 2019 

Additional exposures to government, institutions and 
public sector entities are taken into account 

Q1 2020 

Statistical approach overlaid with expert judgement 

Q4 2018 

Statistical approach overlaid with expert judgement 

Q4 2019 

Statistical approach overlaid with expert judgement 

Q4 2019 

Additional use of monetary statistics and further 
indicators 

Q1 2020 

Statistical approach overlaid with expert judgement 

Q4 2019 

Use of 5% threshold; decision not to use defaulted 
exposures 

Q1 2020 

Decision not to use defaulted exposures 

Q4 2019 

Use of additional COREP data items providing a larger 
sample 

Q4 2019 

Statistical approach overlaid with expert judgement 

Source: ESRB. 
Notes: “ESRB methodology” refers to the methodology laid down in Decision ESRB/2015/3 on the assessment of materiality of 
third countries for the EU banking system in relation to the recognition and setting of countercyclical buffer rates and binds the 
ESRB when identifying material third countries for the EU. Member States are not obliged to apply the ESRB methodology 
when identifying material third countries for themselves. “Calculation” refers to the use of moving averages and the last two 
quarters of the three risk metrics as laid down in Articles 4(1) and 3(2) of Decision ESRB/2015/3. “Threshold” refers to the 1% 
threshold for any of the three metrics as laid down in Article 4(1) of Decision ESRB/2015/3. “Data” refer to the use of the 
COREP data series as laid down in Article 3(2) of Decision ESRB/2015/3. Green dots indicate that the methodology used is 
equivalent to the methodology described in Decision ESRB/2015/3. Orange dots indicate that the methodology is based on the 
ESRB methodology, but that differing metrics, criteria or thresholds are used, which are explained in the column “Comments”. 
Grey dots indicate that a different methodology is used. 

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Annex 1: Material third countries 

121 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annex 2: Active residential real estate 
instruments in Europe 

Table A.2.1 

Collateral stretch instruments 

EEA country 

Limit 

Scope 

Basis for measure 

Austria 

LTV: 80% (a down payment lower than a benchmark of 
20% of total financing needs is considered to be a 
cause for concern) 

Belgium 

LTV: 80% (buy-to-let); 90% (owner-occupied). The 
tolerance margins are 10%, with 0%-90% (buy-to-let) 
and 35% (owner-occupied properties max. 5%-100% 
for first-time buyers) or 20% (not first-time buyers, 0%-
100%). There are some limits for pockets of risk: if 
DSTI>50% and/or DTI>9, then LTV>90% (5% 
tolerance) 

N/A 

Recommendation 

All mortgage lenders 

Recommendation 

Cyprus 

LTV: 80% in cases where the credit facility is granted 
for financing the primary permanent residence of the 
borrower; 70% for all other property financing cases 

Credit institutions 
authorised and operating 
in Cyprus 

Binding regulation 

Czech Republic 

LTV: 90%; the share of loans with a higher LTV is 
limited to 5% per quarter, 90% for buy-to-let 

All credit providers 

Recommendation 

Denmark 

LTV: 95%; for mortgage credit institutions, stricter LTV 
requirement of 90% (75%) if debt surpasses four (five) 
times the annual income 

Banks and mortgage 
credit institutions 

Recommendation 

Estonia 

LTV: 85%; 90% in the case of a KredEx guarantee; up 
to 15% of the amount of new housing loans in a quarter 
is allowed to breach the limit 

Finland 

LTV: 90%; 95% for first-time buyers (a wide range of 
other collateral is taken into account in calculating the 
LTV in addition to the value of the purchased dwelling) 

Hungary 

LTV: between 35% and 80% (depending on the 
currency denomination of the loan). In 2019, LTV 
recalibration: only 25% of the child support loans used 
for the purchase of the same house at most 90 days 
before taking a housing loan will be considered loan 
exposure for calculating the LTV 

All credit institutions 
operating in Estonia, 
including the branches of 
foreign credit institutions 

All credit institutions 
operating in Finland, 
including the branches of 
foreign credit institutions 

Binding regulation 

Binding regulation 

All lenders (both bank 
and non-bank, including 
branches) 

Binding regulation 

Iceland 

LTV: 85% for second-time and subsequent buyers; 
90% for first-time buyers 

All regulated financial 
services providers in 
Iceland 

Binding regulation 

Ireland 

LTV: 80% for second-time and subsequent buyers (of 
which 20% of the SSB new lending is allowed above 
the limit); 90% for first-time buyers (of which 5% of the 
new FTB lending is allowed above the limit); 70% for 
buy-to-let lending (10% of new lending for buy-to-let 
allowed above the limit) 

All regulated financial 
services providers. The 
regulations apply to 
housing loans secured 
on residential property in 
Ireland 

Binding regulation 

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Annex 2: Active residential real estate instruments in Europe 

122 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EEA country 

Limit 

Scope 

Basis for measure 

Latvia 

90%; 95% for loans covered by a state guarantee 
under the Law on Assistance in Resolution of Dwelling 
Issues. 70% for buy-to-let loans and borrowers whose 
actions relating to real estate exceed 20% of their total 
income 

Liechtenstein 

LTV: 80% 

Amortisation: according to the regulation on 
requirements for mortgage loans applicable to home 
loans and loans on income property, the mortgage has 
to be amortised so that the LTV ratio falls below two-
thirds within 20 years 

Lithuania 

LTV: 85% 

All lenders (both bank 
and non-bank, including 
branches) 

Binding regulation 

Credit institutions that 
issue mortgages in 
Liechtenstein 

Binding regulation 

All housing credit 
providers as long as 
credit is provided to 
consumers 

Binding regulation 

Luxembourg 

Malta 

Differentiated LTV limits, with three categories of 
borrowers considered and the following calibration: 

-LTV limit of 100% for first-time buyers acquiring their 
primary residence; 

-LTV limit of 90% for other buyers (i.e. not first-time 
buyers) acquiring their primary residence. This limit is 
implemented in a proportional way via a portfolio 
allowance. Specifically, lenders may issue 15% of the 
portfolio of new mortgages granted to these borrowers 
with an LTV above 90% but below the maximum LTV of 
100%; 

-LTV limit of 80% for other mortgage loans (including 
the buy-to-let segment) 

LTV: (a) For Category I borrowers (for loans with a 
collateral market value exceeding €175,000), the 
following caps apply: an LTV-O cap of 90%, with a 
speed limit of 10% on the volume of loans. (b) For 
Category II borrowers: an LTV-O cap of 85% in the first 
year, with a speed limit of 20% on the volume of loans, 
and an LTV-O cap of 75% from the second year, with a 
speed limit of 20% on the volume of loans. 

Extension of one year in the applicable LTV-O ratio, 
which currently stands at 85%, up until 30 June 2021; 
and 75% from 1 July 2021 

Netherlands 

LTV: 100% 

Norway 

LTV: 85%; 60% for secondary homes in Oslo. 
Amortisation requirements if LTV>60%. Per quarter, 
10% of the volume of new mortgages is permitted to 
exceed one or more of the stress test, DTI, LTV and 
amortisation requirements; this limit is 8% for 
mortgages in Oslo 

All relevant lenders in 
Luxembourg 

Binding regulation 

All lenders granting 
domestic RRE loans 

National directive 

All credit institutions and 
non-bank financial 
companies operating in 
the Netherlands 

Binding regulation 

Mortgage lenders 

Binding regulation 

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123 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EEA country 

Limit 

Scope 

Basis for measure 

Poland 

Portugal 

Romania 

Slovakia 

LTV: 80% as of 2017, having fallen from 90% (2015); 
potential of attaining 90% if this additional part (above 
80%) is insured or collateralised with funds from a bank 
account, government or Narodowy Bank Polski 
securities 

LTV: 90% for credit for own and permanent residence; 
80% for credit for purposes other than own and 
permanent residence. 100% for purchasing immovable 
property held by the credit institutions themselves and 
for property financial leasing agreements. Collateral is 
the minimum of the purchasing price and appraisal 
value 

LTV: 85% for local currency-denominated loans, 80% 
for FX loans granted to hedged borrowers, 75% for 
EUR-denominated loans granted to unhedged 
borrowers, and 60% for other FX loans granted to 
unhedged borrowers; loans granted through the 
governmental program “Noua Casă” are 95% 
irrespective of the currency 

LTV: 90% and the share of loans with LTV>80% to 
reach 30% by the end of 2018 and 20% by the end of 
2019. In 2019 the tightening has been applied 
accordingly 

Amortisation: loans with (partial) deferred payment of 
interest or principal should not be granted. Specified 
exceptions are allowed. All loans must be amortised at 
least by annuity repayments 

Slovenia 

LTV: 80% 

LTV: 85% 

Sweden 

Amortisation: 1% if LTV>50% and 2% if LTV>70% ; 1% 
extra if LTI>450 

Banks 

Recommendation 

All credit institutions and 
financial companies that 
have head offices or 
branches in the 
Portuguese territory 

Recommendation 

Bank and non-bank 
financial institutions 

Binding regulation 

N/A 

Binding regulation 

N/A 

Binding regulation 

Banks and savings 
banks, including 
branches of foreign 
banks 

All credit institutions 
operating in Sweden, 
including the branches of 
foreign credit institutions 

All credit institutions 
operating in Sweden, 
including the branches of 
foreign credit institutions 

Recommendation 

Binding regulation 

Binding regulation 

Source: ESRB. 
Notes: Table A.2.1 refers to all the residential real estate instruments that were active or at least decided before the end of 
2020.This includes three sub-groups of measures: those decided and/or implemented before 2020, decided and implemented in 
2020 and decided in 2020 but to be implemented in the following years. 

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124 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table A.2.2  

Household/income stretch instruments 

EEA country 

Limit 

Scope 

Basis for measure 

DSTI between 30% and 40% 

All credit providers 

Recommendation 

Austria 

Cyprus 

Maturity: loans with maturities of more than 35 years 
should be granted only in exceptional cases. Loan 
terms should not be excessively long and should take 
into account the income situation over the course of the 
borrower’s life 

All credit providers 

Recommendation 

DSTI: limit of 80% of the borrower’s net disposable 
income should not be exceeded (65% for foreign 
currency loans) 

Credit institutions 
authorised and operating 
in Cyprus 

Binding regulation 

Stress test: credit institutions should carry out scenario 
analysis in order to assess the impact on debt servicing 
in case of increases in the loan instalment due to 
increases in the interest rate or any other cause 

Credit institutions 
authorised and operating 
in Cyprus 

Binding regulation 

Czech Republic 

Denmark 

Maturity: 30 years for mortgage loans 

Stress test: prudent credit standards, including 
assessment of client to service loans and withstand 
increased stress 

Amortisation requirement: providers should not provide 
retail loans secured by residential property with a non-
standard repayment schedule leading to a shift of the 
client’s credit commitments to a later period 

Other: in areas with significant price increases 
(Copenhagen and Aarhus), if the DTI>4, households 
should have positive net wealth in the event of a 10% 
decline in the value of the property (25% decline if 
DTI>5) 

LTI: a) If LTI is between 4 and 5, households should 
have sufficient wealth (including properties but 
excluding pension schemes) so that net wealth is still 
positive in case of a decline in the value of the property 
by 10%; b) If LTI is above 5, households should have 
sufficient wealth (including properties but excluding 
pension schemes) so that net wealth is still positive in 
case of a decline in the value of the property by 25% 

Other: Supervisory Diamond that limits a) interest-only 
lending to households with LTV above 60% (less for 
holiday houses); b) variable rate lending (interest rate 
fixation<2 years) to households with LTV above 60% 
(less for holiday houses); c) lending growth (cap of 
15%) that is applicable to each of the segments: private 
residential (owner-occupied), agriculture, other 
corporate; d) short funding; e) large exposures; f) 
liquidity risk; g) funding risk; h) lending growth (20% 
cap for commercial banks) 

All credit providers 

Recommendation 

All credit providers 

Recommendation 

Banks and mortgage 
credit institutions 

Recommendation 

Banks and mortgage 
credit institutions 

Recommendation 

Mortgage and 
commercial banks 

Recommendation 

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EEA country 

Limit 

Scope 

Basis for measure 

DSTI: 50%; up to 15% of the amount of new housing 
loans in a quarter is allowed to breach the limit; a 
borrower’s debt servicing ability is tested with the 
interest rate in the loan contract (base rate plus margin) 
plus 2 percentage points, or an annual rate of 6%, 
whichever is higher 

Estonia 

Maturity: maximum of 30 years for housing loans; up to 
15% of the amount of new housing loans in a quarter is 
allowed to breach the limit 

Finland 

Stress test: tests the borrower’s ability to service the 
debt if the mortgage rate were 6% and had a maturity 
of 25 years; also takes into account housing company 
loans 

DSTI: limit of 33% with a 15% exemption for new loans 
(3/4 for owner-occupied including first-time buyers) as 
long as DTI<7 

France 

All credit institutions 
operating in Estonia, 
including the branches of 
foreign credit institutions 

All credit institutions 
operating in Estonia, 
including the branches of 
foreign credit institutions 

Binding regulation 

Binding regulation 

Banks 

Recommendation 

Banks 

Recommendation 

Maturity: limit of 25 years 

Banks 

Recommendation 

Hungary 

DSTI: for loans with a maturity over five years, there 
are different levels for loans with a floating interest rate 
or an interest rate fixed for less than 5 years (25%-
30%), loans with an interest rate fixed for at least five 
years but less than ten years (35%-40%) and loans 
with an interest rate fixed for at least ten years (50%-
60%). For loans in EUR (30%) or other foreign currency 
(10%) stricter rules are set, also differentiated by the 
interest rate fixation period. Since July 2019, the lower 
of the two values is for borrowers with a monthly net 
income below HUF 500,000, the other value is for 
those earning more 

All credit institutions and 
non-bank financial 
companies operating in 
Hungary 

Binding regulation 

LTI: new housing loans to second and subsequent 
buyers with an LTI >3.5 should be ≤10% of aggregate 
new mortgage lending to these borrowers. New 
housing loans to first-time buyers with an LTI >3.5 
should be ≤20% of aggregate new mortgage lending to 
first-time buyers 

All regulated financial 
services providers. The 
regulations apply to 
housing loans secured 
on residential property in 
Ireland 

Ireland 

Stress test: lenders must assess whether borrowers 
can still afford their mortgage loans on the basis of a 
minimum 2% interest rate increase above the offered 
rate 

DSTI: 40% of net income; stressed DSTI of 50% under 
the scenario of an interest rate of 5%; up to 5% of the 
total value of new housing loans during a calendar year 
is allowed to breach the DSTI limit of 40% (but capped 
at 60% limit) 

Maturity: maximum of 30 years for new housing loans 

Financial services 
providers authorised in 
Ireland or another EU 
Member State or EEA 
country 

All housing credit 
providers as long as 
credit is provided to 
consumers 

All housing credit 
providers as long as 
credit is provided to 
consumers 

Lithuania 

Binding regulation 

Binding regulation 

Binding regulation 

Binding regulation 

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EEA country 

Limit 

Scope 

Basis for measure 

DSTI: 40% in the creditworthiness assessment income 
from the real estate shall not account for more than 
70% of the borrower's total income 

All entities supervised by 
the FCMC 

Binding regulation 

Latvia 

DTI: not more than six times the net income 

All entities supervised by 
the FCMC 

Binding regulation 

Maturity: 30 years for housing loans and seven years 
for consumer loans 

All entities supervised by 
the FCMC 

Binding regulation 

Malta 

DSTI: for Category I borrowers (for loans with a 
collateral market value exceeding €175,000), the 
following caps shall apply: 40% stressed DSTI-O with a 
shock to interest rates of 150 bps. For Category II 
borrowers, the following limits shall apply: 40% 
stressed DSTI-O with a shock to interest rates of 150 
bps 
Temporary easing in the treatment of the stressed 
DSTI-O for both Category I and Category II borrowers. 
If a lender as defined in paragraph 6(r) of Directive 16 
could ascertain on the basis of concrete proof that the 
failure to adhere to the stressed DSTI-O test is 
temporary, the 40% limit set in the said directive could 
be exceeded. The temporary easing applied for a 
period of six months from June 2020 until December 
2020 

Maturity: for Category I borrowers (for loans with a 
collateral market value exceeding €175,000), the 
following caps shall apply: 40-year maturity cap or the 
official retirement age, whichever occurs first. For 
Category II borrowers: 25-year maturity cap or the 
official retirement age, whichever occurs first 

All lenders granting 
domestic RRE loans 

National directive 

All lenders granting 
domestic RRE loans 

National directive 

DSTI: 10.5%-29.5% with a yearly recalibration, 
dependent on the borrower’s income and the interest 
rate. For mortgages with a fixed interest rate of less 
than ten years, the DSTI is calculated using a fixed rate 
(currently 5%) 

All credit institutions and 
non-bank financial 
companies operating in 
the Netherlands 

Binding regulation 

Netherlands 

Maturity: mortgage loans that are amortised after 30 
years are not tax-deductible 

DTI: total debt may not exceed five times gross annual 
income. 10% of the mortgage volume per quarter is 
allowed not to meet the regulatory requirements; the 
limit is 8% for mortgages in Oslo 

Stress test: an interest rate stress test/sensitivity test is 
conducted when assessing the borrower’s repayment 
capacity, making an allowance for an interest rate 
increase of 5 percentage points. Per quarter, 10% of 
the volume of new mortgage is permitted not to meet 
one or more of the stress tests, LTI, LTV and 
amortisation requirements; the limit is 8% for 
mortgages in Oslo 

Norway 

Maturity: mortgage loans 
that are amortised after 
30 years are not tax-
deductible 

Mortgage lenders 

Binding regulation 

Mortgage lenders 

Binding regulation 

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EEA country 

Limit 

Scope 

Basis for measure 

Poland 

DSTI: bank-internal limits for all loans to households; 
banks should pay particular attention to loans with 
DSTI> 40% (for borrowers with incomes below the 
average salary in the region) and DSTI>50% (for other 
borrowers) 

Maturity: banks should recommend to their clients 
loans of maturity not longer than 25 years. If clients ask 
for loans of a longer maturity, banks are recommended 
to grant loans of a maximum maturity of 35 years and 
assess the borrower’s creditworthiness assuming a 
maturity of 25 years. If maturity is longer than 30 years, 
banks should assume exposure maturity of 30 years 

Banks 

Recommendation 

Banks 

Recommendation 

Maturity: maximum of 40 years for new credit relating to 
residential immovable property or credit secured by a 
mortgage or equivalence guarantee; ten years for new 
consumer credit agreements. Average maturity of new 
credit agreements should gradually converge to 30 
years until the end of 2022 

All credit institutions and 
financial companies that 
have head offices or 
branches in the 
Portuguese territory 

Recommendation 

Portugal 

DSTI: limit of 50%; up to 20% of total credit granted by 
each institution in each year may be granted to 
borrowers with a DSTI of up to 60%; up to 5% of total 
credit granted by each institution in each year may 
exceed all such limits 

All credit institutions and 
financial companies that 
have head offices or 
branches in the 
Portuguese territory 

Recommendation 

DSTI: maximum level for consumer loans depending on 
foreign currency, interest rate and income risk; debt 
includes mortgage loans 

Bank and non-bank 
financial institutions 

Binding regulation 

Romania 

Slovakia 

DSTI: a limit of 20% (for FX loans) or 40% (for national 
currency loans); exception for the first RE loan for 
which the limits are 25% (for FX loans) and 45% (for 
national currency loans). Exception: a maximum of 
15% of new loans will be exempted from the regulation 

DSTI: the limit has been tightened from 80% to 60%. 
5% of new loans can be granted with DSTI up to 70 %; 
for floating-rate loans, an interest rate increase of 2 
percentage points is assumed. Exception: for clients 
with debt-to-income (including the new loan) not 
exceeding 1 (or 1.5 for leasing), the above-mentioned 
limit is 100% 

DTI: total borrower indebtedness (including both new 
and existing loans) cannot exceed eight times the 
yearly net disposable income (phasing-in applies). 
From 1 July 2019, the share of new loans with a DTI>8 
can exceed 5% (up to 10%) only for loans granted to 
clients aged 35 or younger and with an income below 
130% of the national average, DTI<9 then applies 

Maturity: a) loans secured by RRE: 30 years with 
possible exemption of 10% of new loans (measure 
transferred from existing recommendation); (b) loans 
not secured by RRE granted by building societies: i) 
maximum maturity: 30 years; ii) maximum share of new 
loans over 25 years: 10%; iii) maximum share of new 
loans over 20 years: 20%; c) other loans not secured 
by RRE: eight years (measure transferred from existing 
recommendation) 

Bank and non-bank 
financial institutions 

Binding regulation 

All regulated financial 
services providers in 
Slovakia 

Binding regulation 

All regulated financial 
services providers in 
Slovakia 

Binding regulation 

N/A 

Binding regulation 

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EEA country 

Limit 

Scope 

Basis for measure 

DSTI: limit of 50% for monthly income up to two times 
the gross minimum wage and 67% limit for monthly 
income above this; the limitations on the attachment of 
a debtor’s financial assets set out in the Enforcement 
and Securing of Claims Act and the Tax Procedure Act, 
i.e. earnings that are exempt from attachment and 
limitations on the attachment of a debtor’s financial 
earnings should be mutatis mutandis taken into 
account in the loan approval process 

Due to COVID-19, some individuals might have 
experienced temporary declines in their income, which 
do not necessarily reflect a change in their long-term 
creditworthiness. Therefore, the macroprudential 
restrictions on household lending were amended to 
provide some temporary flexibility when calculating 
income 

LTI: new residential mortgage loans with LTI≥4.5 should 
be <15% of aggregate volume of new loans on a four-
quarter rolling average basis; de minimis exception for 
lenders with mortgage lending up to GBP 100 million 
per annum or extending fewer than 300 mortgages 

Stress test: assess the ability of the borrower to pay 
back the loan in the case their mortgage rate were 3 
percentage points higher than any contractual 
reversion rate that the borrower might face over the first 
five years of the mortgage contract 

Slovenia 

United 
Kingdom 

Banks and savings 
banks, including 
branches of foreign 
banks 

Binding regulation 

Mortgage lenders 

Binding regulation 

Mortgage lenders 

Recommendation 

Source: ESRB. 
Notes: Table A.2.2 refers to all the residential real estate instruments that were active or at least decided before the end of 
2020.This includes three sub-groups of measures: those decided and/or implemented before 2020, decided and implemented in 
2020 and decided in 2020 but to be implemented in the following years. 

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129 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table A.2.3  

Lender stretch instruments 

EEA country 

Limit 

Scope 

Basis for measure 

Risk weights (Article 458): 5 percentage point add-on to 
the IRB banks’ risk weights on retail exposures secured 
by residential immovable property in Belgium and an 
additional risk-sensitive add-on of 33% of the risk 
weight of the IRB bank’s (residential) mortgage portfolio 

Belgium 

In 2020, Nationale Bank van België/Banque Nationale 
de 

Belgique decided to extend Article 458 for an additional 
year 

CCyB: 0% (lowered in March 2020 in response to the 
COVID-19 pandemic) 

Banks using the IRB 
approach 

Binding regulation 

Banks 

Binding regulation 

Croatia 

Risk weights (Article 124): stricter definition of 
residential property for preferential risk weighting 

Banks using the 
standardised approach 

Binding regulation 

Czech Republic 

CCyB: cancelled the planned increase from 1.75% to 
2% and then decreased from 1.75% to 1% in March 
2020; decreased from 1% to 0.5% in June 2020 

Banks 

Binding regulation 

Estonia 

Risk weights (Article 458): a credit institution-specific 
minimum level of 15% for the exposure-weighted 
average of the risk weights applied to the portfolio of 
retail exposures secured by mortgages on immovable 
property to obligors residing in Estonia 

Risk weights (Article 458): minimum level of 15% for 
the average risk weight on housing loans 

Finland 

In September 2020, FIN-FSA decided to not extend the 
measure after December 2020 

Banks using the IRB 
approach 

Binding regulation 

Banks using the IRB 
approach 

Binding regulation 

Full release of SyRB in response to the COVID-19 
pandemic 

CCyB: decreased to 0% in April in response to the 
COVID-19 pandemic 

CCyB: decreased to 0% in March in response to the 
COVID-19 pandemic 

Banks 

Binding regulation 

Banks 

Binding regulation 

Banks 

Binding regulation 

CCyB: lowered to 0% in March 2020 in response to the 
COVID-19 pandemic 

Banks 

Binding regulation 

SyRB: 2.5%-3% (only domestic exposures) 

Banks 

Binding regulation 

France 

Germany 

Iceland 

Risk weights (Article124): stricter criteria for preferential 
weighting of residential mortgage loans: LTV<75% for 
preferential risk weighting and property must be owner-
occupied 

Ireland 

Banks using the 
standardised approach 

Binding regulation 

CCyB: lowered to 0% in response to the COVID-19 
pandemic 

Banks 

Binding regulation 

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130 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EEA country 

Limit 

Scope 

Basis for measure 

Liechtenstein 

Risk weights (Article124): 35% for residential properties 
with an LTV up to 66.6%; 50% for residential properties 
with an LTV between 66.6% and 80% 

Credit institutions that 
issue mortgages in 
Liechtenstein 

Binding regulation 

SyRB: 1%-2% 

Banks 

Binding regulation 

Lithuania 

CCyB: lowered to 0% in March 2020 in response to the 
COVID-19 pandemic 

Banks, central credit 
unions and central credit 
union groups 

Binding regulation 

Risk weights (other): average minimum risk weight of 
15% for retail residential mortgage loans 

Institutions using the IRB 
approach for credit risk 

Binding regulation 

Luxembourg 208 

Risk weights (other): stricter stress test for mortgage 
books and requiring banks to have appropriate internal 
governance and policies 

Institutions using the IRB 
approach for credit risk 

Binding regulation 

CCyB: 0.25% (as of 2020), 0.5% (as of 2021) 

Banks 

Binding regulation 

Malta 

Risk weights (Article 124): LTV<70% for exposures 
secured by mortgages on residential property when 
applying the 35% risk weight, otherwise 100% 

Credit institutions 
licensed in Malta 

Binding regulation 

Risk weights (Article 164): the minimum LGD value was 
increased from 10% to 20%, as applied to the 
exposure-weighted average of retail exposures secured 
by residential property 

Norway 

Institutions using the IRB 
approach for credit risk 

Binding regulation 

Poland 

Slovakia 

CCyB: lowered to 1% in March in response to the 
COVID-19 pandemic 

Banks 

Binding regulation 

Risk weights (Article 124): 150% for exposures fully 
secured by mortgages on residential real estate where 
the principal or interest instalments depend on changes 
in the exchange rate of one or more foreign currencies 
that differ to the borrower’s income currency 

Banks 

Binding regulation 
for banks using SA, 
Pillar 2 requirement 
for IRB banks 

SyRB: 1% (only domestic exposures) 

Banks 

Binding regulation 

Other: maintain a prudent approach to lending through 
intermediaries (mortgage brokers). Ensure that the 
share of these loans does not create pressure to 
loosen lending standards. Maintain a diverse pool of 
intermediaries 

Slovenia 

Risk weights (Article 124): 35% for exposures secured 
by mortgages on residential property if LTV≤60% 

N/A 

Binding regulation 

Banks and savings 
banks, including 
branches of foreign 
banks from EEA 

Binding regulation 

208   Luxembourg also issued a risk-weight measure in 2013 targeting mortgage portfolios under the standardised approach. 
The legal basis was the CSSF Circular of 11 December 2012 (Circular 12/552). However, this measure remained 
applicable only for half a year since it was overwritten by the implementation of the CRR, which is stricter. 

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131 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EEA country 

Limit 

Scope 

Basis for measure 

Risk weights (Article 458): floor of 25% for exposures 
secured by RRE property. 
In 2020 

Sweden 209 

CCyB: lowered to 0% in March in response to the 
COVID-19 pandemic 

CCyB: 2% (decided in 2019, applicable as of 2020) 

Risk weights (other): a 150% risk weight should apply 
to speculative property development transactions in 
residential real estate 

United 
Kingdom 

All credit institutions 
operating in Sweden, 
including the branches of 
foreign credit institutions 
(all banks using the IRB 
approach) 

Binding regulation 
(Pillar 1) 

Banks 

Binding regulation 

Banks using the 
standardised approach 

Binding regulation 

Risk weights (other): risk weights can vary between 
50% and 250% depending on the rating and maturity of 
the exposures 

Banks using the IRB 
approach 

Binding regulation 

Source: ESRB. 
Notes: Table A.2.3 refers to all the residential real estate instruments that were active or at least decided before the end of 
2020.This includes three sub-groups of measures: those decided and/or implemented before 2020, decided and implemented in 
2020 and decided in 2020 but to be implemented in the following years. 

209   Sweden also activated an SyRB (3%); however, since it does not specifically target the RE sector, it was not considered an 

RE measure. 

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132 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annex 3: Active commercial real estate 
instruments in Europe 

Table A.3.1 

All instruments 

EEA country 

Limit 

Scope 

Basis for measure 

Croatia 

Risk weights (Article 124): 100% for exposures secured 
by mortgages on commercial immovable property, up 
from 50% 

Banks using the 
standardised approach 

Binding regulation 

LTV: 70% for loans for property that is not the 
borrower’s primary residence 

Cyprus 

DSTI: 80% for loans for all property that is not the 
borrower’s primary residence; 65% for FX loans 

DSTI: 100% with a denominator defined as EBITDA 
(i.e. excluding value gains), whereas the nominator 
also requires the loan to be amortised over a maximum 
of 30 years 

Credit institutions 
authorised and operating 
in Cyprus 

Credit institutions 
authorised and operating 
in Cyprus 

Binding regulation 

Binding regulation 

Banks 

Binding regulation 

Denmark 

Other: 25% limit on lending to construction companies 
and real estate companies as a share of total lending 
(Supervisory Diamond) 

Other: 15% lending growth cap (Supervisory Diamond) 

Hungary 

SyRB: institution-specific SyRB rates are set in the 
range of 0% to 2%. The size of the SyRB rate has, up 
until the current revision, depended on the contribution 
of institutions to the systemic risk stemming from FX 
and problem commercial real estate exposures. The 
measure is temporarily suspended because of the 
COVID-19 pandemic 

Banks 

Binding regulation 

Mortgage credit 
companies in lending 
segments 

All credit institutions 
operating in Hungary, 
according to 
predetermined 
thresholds 

Binding regulation 

Binding regulation 

Ireland 

Risk weight (Article 124): minimum of 100% for 
exposures secured by mortgages on commercial 
immovable property 

Banks using the 
standardised approach 

Binding regulation 

Latvia 

Risk weights (Article 124): 100% for exposures secured 
by mortgages on commercial immovable property 

Banks using the 
standardised approach 

Binding regulation 

Risk weights (Article 124): 100% for exposures secured 
by mortgages on commercial immovable property 

Norway 

Banks using the 
standardised approach 
for credit risk 

Binding regulation 

CCyB: 1% 

Banks 

Binding regulation 

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133 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EEA country 

Limit 

Scope 

Basis for measure 

Poland 

LTV: 75%, or 80% if the part above 75% is insured or 
collateralised with funds from a bank account, 
government or Narodowy Bank Polski securities 

Risk weights (Article 124): 100%; exposures secured 
by mortgages on commercial immovable property of 
the borrower and that do not generate income from rent 
or sale of the property became exempt from the 
increased risk weight (October 2020) 

Banks 

Recommendation 

Banks using the 
standardised approach 

Binding regulation 

Romania 

Risk weights (Article 124): 100% for exposures secured 
by mortgages on commercial immovable property 

Banks using the 
standardised approach 

Binding regulation 

Risk weights (Article 124): 100% for exposures secured 
by mortgages on commercial immovable property 

Banks using the 
standardised approach 

Binding regulation 

Sweden 

United 
Kingdom 

Risk weights (Article 458): increase in risk weights of 
corporate exposures through higher Pillar 1 
requirements if the bank’s model meets the FSA’s 
requirements; higher Pillar 2 requirements if not 
(approximately 30%). Estimation of the probability of 
default should anticipate a larger proportion of 
economic downturns with higher default rates 

Risk weights (Article 124): 100% for exposures fully 
secured by mortgages on commercial immovable 
property. Dependent on annual average loss rates for 
commercial mortgage lending in the United Kingdom. 
Stricter criteria for exposures to be treated as 
completely secured by mortgages of commercial 
immovable property that is located in a non-EEA 
country 

Risk weights (other): a 150% risk weight should apply 
to speculative property development transactions in 
commercial real estate 

Banks using the IRB 
approach 

Binding regulation 

Banks using the 
standardised approach 

Binding regulation 

Banks using the 
standardised approach 

Binding regulation 

Risk weights (other): risk weights can vary between 
50% and 250% depending on the rating and maturity of 
the exposures 

Banks using the IRB 
approach 

Binding regulation 

Source: ESRB. 
Notes: Table A.3.1 refers to all the commercial real estate instruments that were active or at least decided before the end of 
2020.This includes three sub-groups of measures: those decided and/or implemented before 2020, decided and implemented in 
2020 and decided in 2020 but to be implemented in the following years. 

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Annex 3: Active commercial real estate instruments in Europe 

134 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annex 4: Systemically important institutions in the 
EU and the United Kingdom 

Table A.4.1 

Cross-border corporate structures of SIIs 

Parent country 

Parent group 

Subsidiaries 

Subsidiary country 

# 

Česká spořitelna a.s. 

Erste&Steiermärkische Bank d.d. 

Erste Group Bank 

Erste Bank Hungary Zrt. 

Austria 

Raiffeisen Bank International 

Belgium 

KBC Group 

Banca Comerciala Romana SA 

Slovenska Sporitelna, a.s. 

Raiffeisenbank (Bulgaria) EAD 

Raiffeisenbank a.s. 

Raiffeisenbank Austria d.d. 

Raiffeisen Bank Zrt. 

Raiffeisen Bank SA 

Tatra banka, a.s. 

United Bulgarian Bank AD 

Československá obchodní banka 

K&H Bank 

Československá obchodná banka 

Czech Republic 

J&T Finance Group 

Poštová banka, a.s. 

Finland 

Nordea Bank Abp 

Nordea Kredit Realkkredit A/S 

Nordea Hypotek AB 

BNP Paribas Fortis SA 

BNP Paribas 

BGL BNP Paribas SA 

France 

Germany 

Greece 

Société Générale 

BNP Paribas Bank Polska SA 

Komerční banka, a.s. 

Société Générale Bank & Trust 

BRD-Groupe Société Générale SA 

SKB banka d.d., Ljubljana 

Commerzbank 

mBank SA 

Deutsche Bank 

Deutsche Bank Luxembourg SA 

Alpha Bank 

Eurobank Ergasias 

Alpha Bank Cyprus Ltd 

Alpha Bank Romania SA 

Eurobank Bulgaria AD 

Eurobank Cyprus Ltd 

CZ 

HR 

HU 

RO 

SK 

BG 

CZ 

HR 

HU 

RO 

SK 

BG 

CZ 

HU 

SK 

SK 

DK 

SE 

BE 

LU 

PL 

CZ 

LU 

RO 

SI 

PL 

LU 

CY 

RO 

BG 

CY 

A Review of Macroprudential Policy in the EU in 2020 / July 2021 
Annex 4: Systemically important institutions in the EU and the United Kingdom 

135 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Parent country 

Parent group 

Subsidiaries 

Subsidiary country 

Hungary 

OTP Bank 

OTP banka Hrvatska d.d. 

DSK Bank EAD 

OTP Bank SA 

Privredna Banka Zagreb d.d. 

Intesa Sanpaolo 

CIB Bank Zrt. 

Italy 

UniCredit 

Netherlands 

ING Bank 

BBVA 

Všeobecná úverová banka, a.s. 

UniCredit Bank Austria AG 

UniCredit Bulbank AD 

UniCredit Bank Czech Republic and 
Slovakia 

UniCredit Bank AG 

Zagrebačka banka d.d. 

UniCredit Bank Hungary Zrt. 

UniCredit Bank SA 

UniCredit Banka Slovenija d.d. 

ING België NV 

ING DiBa AG 

ING Bank Śląski SA 

Garanti Bank SA 

Santander Bank Polska SA 

Spain 

Banco Santander 

Banco Santander Totta SA 

CaixaBank 

Santander UK Plc 

Banco BPI, SA 

SEB Pank AS 

Skandinaviska Enskilda Banken 

AB SEB bankas 

Sweden 

United 
Kingdom 

Swedbank 

AS SEB banka 

Swedbank AS 

Swedbank, AB 

Swedbank AS 

Barclays Bank 

Barclays Bank Ireland plc 

HSBC 

HSBC Bank Malta Plc 

Royal Bank of Scotland 

Ulster Bank Ireland DAC 

BG 

HR 

RO 

HR 

HU 

SK 

AT 

BG 

CZ 

DE 

HR 

HU 

RO 

SI 

BE 

DE 

PL 

RO 

PL 

PT 

UK 

PT 

EE 

LT 

LV 

EE 

LT 

LV 

IE 

MT 

IE 

Sources: Standard and Poor’s Global Market Intelligence (formerly SNL) and ESRB. 
Notes: Listed are the EU SII banking groups with at least one O-SII subsidiary located in another Member State. If the parent  
is not a designated SII at home, then it is included provided the parent has SII subsidiaries in at least two different Member 
States. 

A Review of Macroprudential Policy in the EU in 2020 / July 2021 
Annex 4: Systemically important institutions in the EU and the United Kingdom 

136 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table A.4.2 

Buffer rates for SIIs 

Parent country 

Bank name 

Bawag P.S.K. 

LEI 

Buffer rate 

529900ICA8XQYGIKR372 

Erste Bank der oesterreichischen Sparkassen AG 

549300HUKIA1IZQHFZ83 

Erste Group Bank AG 

PQOH26KWDF7CG10L6792 

Raiffeisen Bank International AG 

9ZHRYM6F437SQJ6OUG95 

Austria 

Raiffeisenlandesbank Niederösterreich-Wien AG 

529900GPOO9ISPD1EE83 

Raiffeisen-Holding Nieder österreich-Wien reg. 
Genossenschaft m.b.H. 

529900SXEWPJ1MRRX537 

1% 

1% 

2% 

2% 

1% 

1% 

Belgium 

Raiffeisenlandesbank Oberösterreich 
Aktiengesellschaft 

I6SS27Q1Q3385V753S50 

1% 

UniCredit Bank Austria AG 

D1HEB8VEU6D9M8ZUXG17 

1% 210 

Volksbank Wien AG 

529900D4CD6DIB3CI904 

1% 

Argenta Bank- en Verzekeringsgroep NV/SA 

5493009ML6YX83YHC820 

0.75% 

Axa Bank Belgium SA 

LSGM84136ACA92XCN876 

0.75% 

Belfius Banque SA/NV 

A5GWLFH3KM7YV2SFQL84 

BNP Paribas Fortis SA/NV 

KGCEPHLVVKVRZYO1T647 

1.5% 

1.5% 

Euroclear SA/NV 

549300CBNW05DILT6870 

0.75% 

ING België NV 

KBC Groep 

JLS56RAMYQZECFUF2G44 

213800X3Q9LSAKRUWY91 

1.5% 

1.5% 

The Bank of New York Mellon SA/NV 

MMYX0N4ZEZ13Z4XCG897 

0.75% 

Bulgarian Development Bank AD 

549300615CPXQO52J309 

Central Cooperative Bank AD 

5299002142DS5ONT5540 

DSK Bank EAD 

529900GEH0DAUTAXUA94 

0.5% 

0.5% 

1% 

Bulgaria 

Eurobank Bulgaria AD 

549300IRGNL8Q3O8Y413 

0.75% 

First Investment Bank AD 

549300UY81ESCZJ0GR95 

1% 

Raiffeisenbank (Bulgaria) EAD 

5299009KAL4KO7584196 

0.75% 

UniCredit Bulbank AD 

549300Z7V2WOFIMUEK50 

1% 

United Bulgarian Bank AD 

5299000PCY1EP8QJFV48 

0.75% 

210   The buffer applied to UniCredit Bank Austria AG is 1% due to the cap set at the parent level. The O-SII framework in 

Austria would otherwise require the institution to hold a 2% buffer. 

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Annex 4: Systemically important institutions in the EU and the United Kingdom 

137 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Parent country 

Bank name 

LEI 

Buffer rate 

Addiko Bank d.d. 

RG3IZJKPYQ4H6IQPIC08 

Erste&Steiermärkische Bank d.d. 

549300A2F46GR0UOM390 

0.5% 

2% 

Hrvatska poštanska banka d.d. 

529900D5G4V6THXC5P79 

0.5% 

Croatia 

OTP banka Hrvatska d.d. 

5299005UJX6K7BQKV086 

Privredna banka Zagreb d.d. 211 

549300ZHFZ4CSK7VS460 

Raiffeisenbank Austria d.d. 

529900I1UZV70CZRAU55 

Zagrebačka banka d.d. 

PRNXTNXHBI0TSY1V8P17 

Hellenic Bank Public Company Ltd 

CXUHEGU3MADZ2CEV7C11 

RCB Bank Ltd 

253400EBCBBVB9TUHN50 

Αlpha Bank Cyprus Ltd 

529900VS0F7BA91P4I60 

Astrobank Ltd 

549300VB6UM9TUOCYW67 

Bank of Cyprus Public Company Ltd 

PQ0RAP85KK9Z75ONZW93 

Cyprus 

Eurobank Cyprus Ltd 

5493004KSNEM4U7L8714 

2% 

2% 

2% 

2% 

1.5% 

0.5% 

0.5% 

0.5% 

2% 

1% 

Alfa Capital Holdings Ltd 

549300XTCMOUXC51WZ58 

0.5% 

Renaissance Securities Ltd 

IK9CLH4U15AXJVV22968 

2% 

SIB Ltd 

F68F5WN6OGTEHIP5ZT82 

0.5% 

BrokerCreditService Ltd 

5493008C22FNI0QEEF10 

1% 

Etoro (Europe) Ltd 

213800GIFQMSV7HROS23 

0.5% 

Czech Republic 

Česká spořitelna, a.s. 

9KOGW2C2FCIOJQ7FF485 

Československá obchodní banka, a.s. 

Q5BP2UEQ48R75BOTCB92 

Komerční banka, a.s. 

IYKCAVNFR8QGF00HV840 

PPF banka a.s. 

31570010000000036567 

Raiffeisenbank, a.s. 

31570010000000004460 

UniCredit Bank CZ and SK, a.s. 

KR6LSKV3BTSJRD41IF75 

Danske Bank A/S 

MAES062Z21O4RZ2U7M96 

DLR Kredit A/S 

Jyske Bank A/S 

529900PR2ELW8QI1B775 

3M5E1GQGKL17HI6CPN30 

Denmark 

Nordea Kredit Realkreditaktieselskab 

52990080NNXXLC14OC65 

Nykredit Realkredit A/S 

LIU16F6VZJSD6UKHD557 

Sydbank A/S 

GP5DT10VX1QRQUKVBK64 

Spar Nord Bank A/S 

549300DHT635Q5P8J715 

3% 

3% 

3% 

0% 

1% 

2% 

3% 

1% 

1.5% 

1.5% 

2% 

1% 

1% 

211   The buffer to which Privredna banka Zagreb is assigned to within the OSII buffer rate calibration is 2%; however, in 

practice, the bank is obliged to maintain 1.75% due to the cap on the subsidiary buffer rate. 

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Annex 4: Systemically important institutions in the EU and the United Kingdom 

138 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Parent country 

Estonia 

Bank name 

AS LHV Pank 

LEI 

Buffer rate 

529900GJOSVHI055QR67 

Luminor Bank AS 

213800JD2L89GGG7LF07 

AS SEB Pank 

Swedbank AS 

549300ND1MQ8SNNYMJ22 

549300PHQZ4HL15HH975 

Municipality Finance Plc 

529900HEKOENJHPNN480 

0.5% 

Finland 

Nordea Bank Abp 

529900ODI3047E2LIV03 

OP Group 

BNP Paribas 

Groupe BPCE 

7437003B5WFBOIEFY714 

R0MUWSFPU8MPRO8K5P83 

1.5% 

FR9695005MSX1OYEMGDF 

Groupe Credit Agricole 

FR969500TJ5KRTCJQWXH 

1% 

2% 

2% 

2% 

2% 

1% 

1% 

1% 

France 

Groupe Credit Mutuel 

9695000CG7B84NLR5984 

0.5% 

La Banque Postale 

96950066U5XAAIRCPA78 

0.25% 

Société Générale 

O2RNE8IBXP4R0TD8PU41 

1% 

HSBC-France 

F0HUI1NY1AZMJMD8P67 

0.25% 

Bayerische Landesbank 

VDYMYTQGZZ6DU0912C88 

0.5% 

Commerzbank AG 

851WYGNLUQLFZBSYGB56 

1.25% 

DekaBank Deutsche Girozentrale 

0W2PZJM8XOY22M4GG883 

0.25% 

Deutsche Bank AG 

7LTWFZYICNSX8D621K86 

DZ Bank AG, Zentral-Genossenschaftsbank 

529900HNOAA1KXQJUQ27 

2% 

1% 

ING DiBa AG 

3KXUNHVVQFIJN6RHLO76 

0.25% 

Germany 

Landesbank Baden-Württemberg 

B81CK4ESI35472RHJ606 

0.75% 

Landesbank Hessen-Thüringen Girozentrale 

DIZES5CFO5K3I5R58746 

0.75% 

Landwirtschaftliche Rentenbank 

529900Z3J0N6S0F7CT25 

0.25% 

Norddeutsche Landesbank Girozentrale 

DSNHHQ2B9X5N6OUJ1236 

0.25% 

NRW Bank 

52990002O5KK6XOGJ020 

0.25% 

Unicredit Bank AG 

2ZCNRR8UK83OBTEK2170 

1% 

J.P. Morgan AG 

549300ZK53CNGEEI6A29 

0.25% 

Alpha Bank S.A. 

5299009N55YRQC69CN08 

Greece 

Eurobank Ergasias Bank S.A. 

JEUVK5RWVJEN8W0C9M24 

National Bank of Greece S.A. 

5UMCZOEYKCVFAW8ZLO05 

1% 

1% 

1% 

Piraeus Bank S.A. 

M6AD1Y1KW32H8THQ6F76 

0.75% 

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139 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Parent country 

Bank name 

CIB Bank Zrt. 

LEI 

Buffer rate 

549300MSY5NIVC0BME80 

Erste Bank Hungary Zrt. 

549300XWJHRKLHU2PS28 

0.5% 

0.5% 

Kereskedelmi és Hitelbank Zrt. 

KFUXYFTU2LHQFQZDQG45 

1% 

Hungary 

MTB Magyar Takarékszövetkezeti Bank Zrt. 

2594004MC7VOKSK7Z633 

MKB Bank Zrt. 

OTP Bank Nyrt. 

3H0Q3U74FVFED2SHZT16 

529900W3MOO00A18X956 

0.5% 

0.5% 

2% 

Raiffeisen Bank Zrt. 

5493001U1K6M7JOL5W45 

0.5% 

UniCredit Bank Hungary Zrt. 

Y28RT6GGYJ696PMW8T44 

Arion banki hf. 

Íslandsbanki hf. 

RIL4VBPDB0M7Z3KXSF19 

549300PZMFIQR79Q0T97 

Landsbankinn hf. 

549300TLZPT6JELDWM92 

AIB Group plc 

635400AKJBGNS5WNQL34 

Bank of Ireland Group plc 

635400C8EK6DRI12LJ39 

Citibank Holdings Ireland Ltd 

549300K7L8YW8M215U46 

Ulster Bank Ireland DAC 

635400KQIMALJ4XLAD78 

1% 

2% 

2% 

2% 

1.5% 

1.5% 

1% 

0.5% 

Bank of America Europe DAC 

EQYXK86SF381Q21S3020 

0.75% 

Barclays Bank Ireland plc 

2G5BKIC2CB69PRJH1W31 

1% 

Gruppo Banco BPM 

815600E4E6DCD2D25E30 

0.25% 

Intesa Sanpaolo S.p.A. 

2W8N8UU78PMDQKZENC08 

0.75% 

UniCredit S.p.a. 

549300TRUWO2CD2G5692 

1% 

Gruppo Monte dei Paschi di Siena 

J4CP7MHCXR8DAQMKIL78 

0.25% 

Akciju sabiedrība Citadele banka 

2138009Y59EAR7H1UO97 

1.5% 

Akciju sabiedrība Rietumu Banka 

2138007F5HA5FFJROB80 

1.25% 

Iceland 

Ireland 

Italy 

Latvia 

549300YW95G1VBBGGV07 

1.75% 

AS SEB banka 

Swedbank AS 

LGT Bank AG 

549300FXBIWWGK7T0Y98 

5493009EIBTCB1X12G89 

Liechtenstein 

Liechtensteinische Landesbank AG 

529900OE1FOAM50XLP72 

VP Bank AG 

MI3TLH1I0D58ORE24Q14 

AB SEB bankas 

549300SBPFE9JX7N8J82 

Lithuania 

AB Šiaulių bankas 

549300TK038P6EV4YU51 

Swedbank AB 

549300GH3DFCXVNBHE59 

2% 

2% 

2% 

2% 

2% 

1% 

2% 

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Annex 4: Systemically important institutions in the EU and the United Kingdom 

140 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Parent country 

Bank name 

LEI 

Buffer rate 

Banque et Caisse d’Epargne de l’Etat Luxembourg 

R7CQUF1DQM73HUTV1078 

Banque Internationale à Luxembourg S.A. 

9CZ7TVMR36CYD5TZBS50 

BGL BNP Paribas 

UAIAINAJ28P30E5GWE37 

Luxembourg 

Clearstream Banking S.A. 

549300OL514RA0SXJJ44 

J.P. Morgan Bank Luxembourg S.A. 

7W1GMC6J4KGLBBUSYP52 

RBC Investor Services Bank S.A. 

549300IVXKQHV6O7PY61 

0.5% 

0.5% 

0.5% 

0.5% 

0.5% 

0.5% 

Malta 

Société Générale S.A. 

TPS0Q8GFSZF45ZZFL873 

1% 212 

Bank of Valletta Group 

529900RWC8ZYB066JF16 

2% 

HSBC Bank Malta Plc 

549300X34UUBDEUL1Z91 

1.5% 

MDB Group Ltd 

APS Bank plc. 

213800TC9PZRBHMJW403 

1% 

213800A1O379I6DMCU10 

0.25% 

ABN AMRO Bank N.V. 

BFXS5XCH7N0Y05NIXW11 

1.5% 

BNG Bank N.V. 

529900GGYMNGRQTDOO93 

Netherlands 

Coöperatieve Rabobank U.A. 

DG3RU1DBUFHT4ZF9WN62 

De Volksbank N.V. 

724500A1FNICHSDF2I11 

1% 

2% 

1% 

ING Groep NV 

3TK20IVIUJ8J3ZU0QE75 

2.5% 

Norway 

DNB ASA 

549300GKFG0RYRRQ1414 

Kommunalbanken AS 

549300GKFG0RYRRQ1414 

2% 

1% 

Poland 

BNP Paribas Bank Polska SA 

NMH2KF074RKAGTH4CM63 

0.25% 

Bank Handlowy w Warszawie SA 

XLEZHWWOI4HFQDGL4793 

0.25% 

Bank Polska Kasa Opieki SA 

5493000LKS7B3UTF7H35 

0.75% 

Bank Polskiej Spółdzielczości SA 

BB3BGO3LCED63R8R9R41 

0.1% 

Santander Bank Polska SA 

259400LGXW3K0GDAG361 

0.75% 

ING Bank Ślaski SA 

259400YLRTOBISHBVX41 

mBank SA 

259400DZXF7UJKK2AY35 

Powszechna Kasa Oszczędności Bank Polski SA 

P4GTT6GF1W40CVIMFR43 

SGB-Bank SA 

259400P9KF07OP2K5P83 

0.5% 

0.5% 

1% 

0.1% 

Bank Millennium SA 

259400OFDZ9KPZEO8K78 

0.25% 

212   The buffer applied to Société Générale S.A. is 1% due to the cap set at the parent level. The O-SII framework in 

Luxembourg would otherwise require the institution to hold a 2% buffer. 

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Annex 4: Systemically important institutions in the EU and the United Kingdom 

141 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Parent country 

Bank name 

Banco BPI 

LEI 

Buffer rate 

3DM5DPGI3W6OU6GJ4N92 

0.5% 

Portugal 

Romania 

Banco Comercial Português 

JU1U6S0DG9YLT7N8ZV32 

1% 

Caixa Económica Montepio Geral 

2138004FIUXU3B2MR537 

0.25% 

Caixa Geral de Depósitos 

TO822O0VT80V06K0FH57 

LSF Nani Investments S.à.r.l. 

222100K6QL2V4MLHWQ08 

Santander Totta SGPS 

5493005RLLC1P7VSVC58 

Alpha Bank România S.A. 

529900TKT32Z5LP7XF90 

Banca Comercială Română S.A. 

549300ORLU6LN5YD8X90 

Banca Transilvania S.A. 

549300RG3H390KEL8896 

BRD - Groupe Société Générale S.A. 

5493008QRHH0XCLJ4238 

CEC Bank S.A. 

2138008AVF4W7FMW8W87 

OTP Bank Romania S.A. 

5299003TM0P7W8DNUF61 

Raiffeisen Bank S.A. 

549300RFKNCOX56F8591 

UniCredit Bank S.A. 

5493003BDYD5VPGUQS04 

Československá obchodná banka a.s. 

52990096Q5LMCH1WU462 

1% 

0.5% 

0.5% 

1% 

2% 

2% 

1% 

2% 

1% 

2% 

1% 

1% 

Poštová banka a.s. 

315700PLTAXHBHZP5J02 

0.25% 

Slovakia 

Slovenská sporiteľňa a.s. 

549300S2T3FWVVXWJI89 

Tatra banka a.s. 

3157002JBFAI478MD587 

Všeobecná úverová banka a.s. 

549300JB1P61FUTPEZ75 

2% 

1.5% 

2% 

Slovenia 

NKBM - Nova Kreditna Banka Maribor  

549300J0GSZ83GTKBZ89 

0.5% 

NLB - Nova Ljubljanska Banka d.d. 

5493001BABFV7P27OW30 

1% 

SID - Slovenska izvozna in razvojna banka d.d. 

549300BZ3GKOJ13V6F87 

0.25% 

SKB Banka d.d. 

549300H7CCQ6BSQBGG72 

0.25% 

Unicredit Banka Slovenija d.d. 

549300O2UN9JLME31F08 

0.25% 

Intesa Sanpaolo 

549300ECJDDLOVWWL932 

0.25% 

Banco Bilbao Vizcaya Argentaria, S.A. 

K8MS7FD7N5Z2WQ51AZ71 

0.75% 

Banco de Sabadell, S.A. 

SI5RG2M0WQQLZCXKRM20 

0.25% 

Spain 

Banco Santander, S.A. 

5493006QMFDDMYWIAM13 

1% 

BFA Tenedora de Acciones, S.A.U. (Bankia, S.A.) 

549300GT0XFTFHGOIS94 

0.25% 

Caixabank, S.A. 

7CUNS533WID6K7DGFI87 

0.25% 

Sweden 

Nordea Hypotek AB 

5493000K2HPWIF6MFO29 

Skandinaviska Enskilda Banken AB 

F3JS33DEI6XQ4ZBPTN86 

Svenska Handelsbanken AB 

M312WZV08Y7LYUC71685 

Swedbank AB 

NHBDILHZTYCNBV5UYZ31 

0% 

4% 

4% 

4% 

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142 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Parent country 

Bank name 

Barclays Plc 

LEI 

Buffer rate 

213800LBQA1Y9L22JB70 

United 
Kingdom 

Citigroup Global Markets Limited 

XKZZ2JZF41MRHTR1V493 

Credit Suisse International 

E58DKGMJYYYJLN8C3868 

Credit Suisse Investments (UK) 

549300FK5LWVMQ9QY386 

Goldman Sachs Group UK Limited 

549300RQT6K4WXZL3083 

HSBC Holdings Plc 

MLU0ZO3ML4LN2LL2TL39 

J.P. Morgan Capital Holdings Limited 

549300Z1UDXFNOBBUI23 

Lloyds Banking Group Plc 

549300NYKK9MWM7GGW15 

Merrill Lynch International 

GGDZP1UYGU9STUHRDP48 

Morgan Stanley International Limited 

LSMWH68Y2RHEDP8W5261 

Nationwide Building Society 

549300XFX12G42QIKN82 

Nomura Europe Holdings Plc 

549300IU15NXFPV2FC82 

Santander UK Group Holdings Plc 

549300F5XIFGNNW4CF72 

Standard Chartered Plc 

U4LOSYZ7YG4W3S5F2G91 

1% 

0% 

0% 

0% 

0% 

1% 

0% 

2% 

0% 

0% 

1% 

0% 

1% 

0% 

The Royal Bank of Scotland Group Plc 

2138005O9XJIJN4JPN90 

1.5% 

Source: ESRB. 
Note: The table above displays fully phased-in buffers. 

A Review of Macroprudential Policy in the EU in 2020 / July 2021 
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143 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table A.4.3 

Changes in the SII lists and/or SII buffer levels notified in 2020 compared with the 2019 lists 

and buffer levels 

EEA country 

Changes 

Bulgaria 

Cyprus 

Croatia 

Finland 

France 

Germany 

Ireland 

Luxembourg 

Malta 

Netherlands 

Norway 

Poland 

Romania 

Slovakia 

Sweden 

United 
Kingdom 

Decrease of the fully phased-in buffer for one institution 

Decrease of the fully phased-in buffers for three institutions 

Decrease of the fully phased-in buffer for one institution 

Decrease of the fully phased-in buffer for one institution 

Addition of one institution to the O-SII list 

Addition of one institution to the O-SII list 

Decrease of the fully phased-in buffers for eight institutions 

Increase of the fully phased-in buffer for one institution 

Removal of one institution from the O-SII list 

Increase of the fully phased-in buffer for one institution 

Decrease of the fully phased-in buffers for three institutions 

Decrease of the fully phased-in buffer for one institution 

Addition of one institution to the O-SII list 

Decrease of the fully phased-in buffer for one institution 

Removal of one institution from the O-SII list 

Decrease of the fully phased-in buffer for one institution 

Decrease of the fully phased-in buffer for one institution 

Decrease of the fully phased-in buffers for three institutions 

Decrease of the fully phased-in buffers for three institutions 

Increase of the fully phased-in buffers for four institutions 

Source: ESRB. 
Notes: Changes in buffer levels resulting from phasing-in arrangements are not included. The SII classification is based on the 
notifications the ESRB received pertaining to the 2019 and 2020 identification exercises. The changes shown result from 
comparing the two regardless of the date of application. The G-SII/O-SII identifications are to take effect immediately or in the 
near future. In the case of Cyprus, two sets of O-SIIs have been identified, depending on whether they are classified as credit 
institutions or investment firms. The buffer targeting SII-specific risks includes the O-SII buffer, the G-SII buffer, the SyRB and 
Pillar 2 measures only if the national designated authority publicly stated that such measures are used to target these risks. The 
O-SII/G-SII buffer is cumulated with the SyRB according to the CRD IV framework. 

A Review of Macroprudential Policy in the EU in 2020 / July 2021 
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144 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table A.4.4 

Identification methodology 

Compliance 
with EBA 
guidelines 

Small 
institutions 
included 

EEA country 

Optional indicators/ 

Non-banks 
excluded 

Thres-
hold 

Deviation from EBA scoring 
methodology 

Additional 
institutions 
identified 

Austria 

Yes 

Yes 

Yes 

275 

Deposit guaranteed with 
threshold of 350 bps 

Belgium 

Bulgaria 

Yes 

Yes 

Yes 

Yes 

Yes 

350 

Domestic private sector deposits, 
domestic private sector loans 

Yes 

275 

N/A 

Czech Republic 

Yes 

Yes 

Yes 

425 

Share in private sector deposits, 
private sector loans and former 
O-SII status 

Croatia 

Cyprus 

Yes 

Yes 

Yes 

Yes 

Yes 

275 

Number of retail deposit accounts 
and former O-SII status 

No 

350 

N/A 

N/A 

Denmark 

Yes 

Yes 

Yes 

350 

Meeting one criteria is enough: 
total assets as a percentage of 
domestic GDP > 6.5%; loans as a 
percentage of total lending by the 
domestic sector > 5%; deposits 
as a percentage of total domestic 
sector deposits > 3% 

Estonia 

Finland 

No 

Yes 

Yes 

Yes 

Yes 

350 

Private sector domestic deposits 
and private sector domestic loans 

Yes 

275 

N/A 

France 

Yes 

N/A 

N/A 

350 

Share of private domestic 
deposits, share of private 
domestic loans 

2 

2 

N/A 

0 

0 

3 

0 

N/A 

1 

8 

Germany 

Greece 

Yes 

Yes 

Yes 

Yes 

Yes 

350 

Computation of an adjusted EBA 
score, threshold 100 of bps 

Yes 

350 

N/A 

N/A 

Hungary 

Yes 

Yes 

Yes 

275 

Off-balance sheet items, share in 
clearing and settlement system, 
assets under custody, interbank 
claims and/or liabilities, market 
transaction volumes or values 

Iceland 

Yes 

Yes 

No 

350 

FX market turnover 

Ireland 

Yes 

Yes 

No 

350 

Optional indicators are used only 
for the identification of investment 
firms, and no investment firms 
were identified as O-SIIs in 2020 

Italy 

Yes 

Yes 

Yes 

350 

N/A 

Latvia 

No 

Yes 

Yes 

425 

Discretionary exclusion of one 
institution for extraordinary 
changes in domestic banking 
landscape 

0 

0 

1 

N/A 

-1 

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145 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Compliance 
with EBA 
guidelines 

Small 
institutions 
included 

Optional indicators/ 

Non-banks 
excluded 

Thres-
hold 

Deviation from EBA scoring 
methodology 

Additional 
institutions 
identified 

Yes 

No 

Yes 

Yes 

Yes 

No 

350 

Banks’ assets relative to GDP 

350 

N/A 

EEA country 

Liechtenstein 

Lithuania 

Luxembourg 

Yes 

Yes 

Yes 

325 

Malta 

No 

Yes 

Yes 

425 

Netherlands 

Yes 

Yes 

N/A 

350 

Indicator of centrality developed 
by the BCL and assets under 
custody from investment funds 

Inclusion of “private sector 
deposits from Maltese residents” 
and “private sector loans to 
Maltese residents” under a single 
step 

Total exposure-at-default, type of 
customers, number of deposit 
accounts – retail, deposits 
guaranteed under deposit 
guarantee system, potential 
reputational contagion, potential 
contagion through shareholders, 
potential contagion through 
entities in conglomerates 

0 

N/A 

3 

N/A 

1 

Norway 

Yes 

N/A 

N/A 

350 

Total as percentage of GDP, 
share of domestic lending market 

N/A 

Poland 

Yes 

Yes 

Yes 

350 

Portugal 

Yes 

Yes 

N/A 

350 

Romania 

Yes 

Yes 

N/A 

275 

Importance for an institutional 
protection scheme 

Geographical breakdown of 
banks’ activities (deposits and 
loans) 

Private sector loans; retail 
deposits, corporate deposits; 
interbank claims and/or liabilities; 
payment services provided to 
market participants or others; 
potential contagion through 
entities in 
conglomerate/shareholders 

Slovakia 

Slovenia 

Spain 

Sweden 

United 
Kingdom 

Yes 

No 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

No 

Yes 

425 

Total RWA, retail loans and retail 
deposits 

Yes 

Yes 

No 

500 

350 

350 

Threshold of 500 bps 

N/A 

N/A 

No 

350 

Computation of an adjusted EBA 
score, threshold of 100 bps 

2 

0 

0 

0 

N/A 

N/A 

1 

9 

Source: ESRB. 
Notes: The table is based on the notifications the ESRB received pertaining to the 2020 identification exercise. Columns 2,3,4,5 
and 6 refer to questions 4.2.a, 4.2.g, 4.2.i, 4.2.b and 4.2.d of the relevant notification template for O-SIIs. 

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Annex 4: Systemically important institutions in the EU and the United Kingdom 

146 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table A.4.5 

Calibration methodology 

EEA country 

Calibration 
method 

Information used for calibration 

Number of 
buckets 

Thresholds for 
bucketing 

Austria 

Bucketing 

Systemic importance scores 

3 

637-999 (1.5%) 

≥1,000 (2%) 

Belgium 

Bucketing, Equal 
expected impact 
(EEI) 

Systemic importance scores 

Historical losses in the banking sector 

Stress test results 

2 

Level playing field and single market 
considerations 

275-636 (1%) 

Bucket 1: 1.5% 

Bucket 2: 0.75% 

Bulgaria 

Bucketing 

Systemic importance scores 

Findings from the supervisory asset 
quality review and the stress test 

Bucket 1: 1% 

3 

Bucket 2: 0.75% 

Bucket 3: 0.5% 

Croatia 

EEI 

Systemic importance scores 

Expert judgement 

N/A 

- 

Cyprus 

Bucketing 

Systemic importance scores 

Level playing field 

4 

>2,500 (2%) 

2,500-1,751 (1.5%) 

1,750-1,001 (1%) 

1,000-350 (0.5%) 

Czech Republic 

N/A 

N/A 

N/A 

N/A 

Denmark 

Bucketing 

Estonia 

Bucketing 

EEI 

Finland 

Bucketing 

Systemic importance scores 
(adjusted): 

- Balance as percentage of GDP 

- Loans as percentage of sector loans 

- Deposits as percentage of sector 
deposits 

Systemic importance scores 

Linearly from 350 bps to 1,200 bps 
with buffers of 50 bps to 200 bps 
(rounded to 50 bps) 

Peer review 

Recalibrated in response to COVID-19; 
buffers were then benchmarked 
against the ECB floor methodology and 
found to be higher than the minimum 
level reflected in the floor methodology 

5 

4 

≥35 (3%) (SRB) 

25-35 (2.5%) 

15-25 (2%) 

5-15 (1.5%) 

0-5 (1%) 

≥1,200 (2%) 

850-1,200 (1.5%) 

510-850 (1%) 

350-510 (0.5%) 

N/A 

N/A 

France 

Bucketing 

Systemic importance scores 

Expert judgement 

5 

≥3,000 (2%) 

2,000-3,000 (1.5%) 

1,000-2,000 (1%) 

500-1,000 (0.5%) 

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147 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EEA country 

Calibration 
method 

Information used for calibration 

Number of 
buckets 

Thresholds for 
bucketing 

Germany 

Bucketing; equal 
expected impact 
(EEI) 

Systemic importance scores (adjusted) 

12 

Greece 

Bucketing; equal 
expected impact 
(EEI) 

Systemic importance scores 

5 

3 

1 

6 

Hungary 

EEI 

Systemic importance scores 

Peer review 

Cluster analysis 

Equal expected impact 

Expert judgement 

Iceland 

Expert 
judgement 

As all institutions identified as O-SII are 
well above the 350-point threshold, the 
maximum 2% buffer has been applied 
to all O-SII banks 

Ireland 

EEI 

Systemic importance scores 

Historical losses (PD) 

Range of buffer rates 

Peer review 

Italy 

Bucketing 

Systemic importance scores 

Cluster analysis (k-means with 2, 3, 4 
and 5 clusters) 

Latvia 

EEI 

Systemic importance scores (adjusted) 

Return on risk-weighted assets 

Liechtenstein 

Bucketing 

Systemic importance scores 

Lithuania 

EEI, 

expected losses 
(average) 

Return on risk-weighted assets 

Historical losses 

≥4,840 (3%) 

4,090- 4,839 (2.75%) 

3,340-4,089 (2.5%) 

2,590-3,339 (2.25%) 

1,840-2,589 (2%) 

1,280-1,839 (1.75%) 

890-1,279 (1.5%) 

620-889 (1.25%) 

430-619 (1%) 

300-429 (0.75%) 

210-299 (0.5%) 

100-209 (0.25%) 

- 

- 

- 

- 

≥4,000 (1.25%) 

3,000-4,000 (1%) 

5 

2,000-3,000 (0.75%) 

1,000-2,000 (0.25%) 

350-1000 (0.25%) 

4 

3 

- 

- 

≥1,000 (2%) 

675-1,000 (1.5%) 

350-675 (1%) 

- 

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Annex 4: Systemically important institutions in the EU and the United Kingdom 

148 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EEA country 

Luxembourg 

Calibration 
method 

Bucketing 

(linear 
regression) 

Information used for calibration 

Number of 
buckets 

Thresholds for 
bucketing 

Linear regression 

Scaling 

4 

Consistency of G-SII/O-SII buffer 

≥1,300 (2%) 

975-1,300 (1.5%) 

650- 975 (1%) 

325-650 (0.5%) 

≥1,700 (2%) 

1,200=1,699 (1.5%) 

Malta 

Bucketing 

Systemic importance scores 

5 

830-1,199 (1%) 

Netherlands 

Bucketing 

Recalibration due to COVID-19 and 
CRD V 

Norway 

Bucketing 

Systemic importance scores 

580-829 (0.5 %) 

425-579 (0.25%) 

4 

2 

- 

- 

≥1,575 (2%) 

1,225-1,575 (1%) 

Poland 

Bucketing 

Systemic importance scores 

5 

875-1,225 (0.75%) 

Portugal 

Bucketing 

Systemic importance scores 

Cluster analysis 

Romania 

Bucketing 

Slovakia 

Bucketing 

Systemic importance scores 

Legal constraint for subsidiaries (1%) 

Sustainable development of the 
lending activity 

Most banks are subsidiaries of EU 
groups (6/8) 

Systemic importance scores 

Expert judgement 

Slovenia 

Bucketing 

Peer review 

State of the credit cycle 

Systemic importance scores 

Spain 

Bucketing 

Systemic importance scores 

4 

525-875 (0.5%) 

350-525 (0.25%) 

≥2,800 (2%) 

2,100-2,800 (1%) 

5 

1,400-2,100 (0.75%) 

700-1,400 (0.5%) 

350-700 (0.25%) 

- 

3 

8 

- 

- 

≥5,400 (2%) 

4,700-5,399 (1.75%) 

4,000-4,699 (1.5%) 

3,300-3,999 (1.25%) 

2,600-3,299 (1%) 

1,900-2,599 (0.75%) 

1,200-1,899 (0.50%) 

500-1,199 (0.25%) 

≥2,901 (1%) 

1,951- 2,900 (0.75%) 

901-1,950 (0.5%) 

350-900 (0.25%) 

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149 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EEA country 

Sweden 

United 
Kingdom 

Calibration 
method 

Supervisory 
judgement 

Bucketing 

Information used for calibration 

Number of 
buckets 

Thresholds for 
bucketing 

Systemic importance scores 

Institutions with total assets greater 
than GBP 175 billion are subject to a 
positive O-SII buffer rate 

- 

3 

- 

- 

Source: ESRB. 
Note: The table is based on the notifications the ESRB received pertaining to the 2020 identification exercise. 

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Annex 4: Systemically important institutions in the EU and the United Kingdom 

150 

 
 
 
 
 
Annex 5: Main features of the systemic risk buffer 
in the EU and UK 

Table A.5.1 

Main features of the SyRB in Europe 

EEA country 

Level 

Banks 

Exposures 

Main motivation 

Austria 

0.5%, 1% 
or 2% 

11 banks 213 

All exposures 

Size, profitability, capitalisation and ownership 
structure of the banking sector, exposure to 
emerging markets 

Bulgaria 

3% 

All banks 

Domestic 
exposures 

Small and open economy with high trade openness, 
high level of indebtedness and cross-border 
interconnectedness of the private sector 

Croatia 

1.5% 

All banks 

All exposures 

High external, public and private debt, low activity 
rate and small open economy 

Czech Republic 

1%,2% or 
3% 

Five banks identified 
as O-SIIs 214 

All exposures 

Size and concentration of banking sector, common 
exposures, openness of the economy 

Denmark 

1%,1.5%, 
2% or 3% 

Seven banks identified 
as O-SIIs 215 

All exposures 

Importance of O-SIIs to the economy 

Denmark 

(Faroe Islands) 

3% 

All banks 

Domestic 
exposures 

Small and open economy, heavily dependent on 
few export goods 

Estonia 

0% 

All banks 

Finland 

0% 

All banks 

N/A 

N/A 

The buffer was deactivated due to the widespread 
negative impact of COVID-19 

The buffer was deactivated due to the widespread 
negative impact of COVID-19 

Hungary 

0% 

All banks 

Domestic 
exposures 

The buffer was deactivated due to the widespread 
negative impact of COVID-19 

Iceland 

3% 

All banks 

Liechtenstein 

1% or 2% 

Three of the banks 
identified as O-SIIs 
and three other banks 

Domestic 
exposures 

All exposures 

Netherlands 

0% 

Three largest banks 216 

N/A 

Structural vulnerabilities of a small open economy 

Structural vulnerabilities of a small open economy, 
amplified by the importance and concentration of 
the banking sector 

The banks are no longer subject to an SyRB 
following the transposition of CRD V into Dutch 
national legislation 

Norway 

3% 217 or 
4.5% 

All banks 

Domestic 
exposures 

High level of indebtedness, size of the banking 
sector, level of capitalisation 

213   Erste Group Bank, Raiffeisen Bank International, Unicredit Bank Austria, Raiffeisenlandesbank Oberösterreich 

Aktiengesellschaft, Raiffeisen-Holding Niederösterreich-Wien, BAWAG P.S.K., HYPO NOE Gruppe Bank, Vorarlberger 
Landes-und Hypothenbank, Hypo Tirol Bank, Oberösterreichische Landesbank, Volksbanken Verbund. 

214   Česká spořitelna, Československá obchodní banka (ČSOB), Komerční banka, Unicredit Bank Czech Republic and 

Slovakia, Raiffeisenbank. 

215   Danske Bank, DLR Kredit, Jyske Bank, Nordea Kredit, Nykredit Realkredit, Sydbank, Spar Nord Bank. 

216   ABN Amro Bank, ING Bank, Rabobank. 

217   For institutions not using the Advanced IRB Approach, the buffer rate for all exposures will be 3% until 31 December 2022, 

after which they will have to comply with the single 4.5% buffer rate. 

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Annex 5: Main features of the systemic risk buffer in the EU and UK 

151 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EEA country 

Level 

Banks 

Exposures 

Main motivation 

Poland 

0% 

All banks 

N/A 

Romania 

0%, 1% 
or 2% 

24 banks identified 
based on the level of 
the NPL ratio and the 
coverage ratio 

All exposures 

The buffer was deactivated due to the widespread 
negative impact of COVID-19 

Potential increase in NPL ratios following a rise in 
interest rates and a slowdown in the balance sheet 
clean-up process. Tensions surrounding 
macroeconomic equilibria 

Slovakia 

1% 

Three of the banks 
identified as O-SIIs 

Domestic 
exposures 

Size and concentration of the banking sector, 
structural vulnerabilities of a small open economy 

Sweden 

3% 

Three largest banks 218  All exposures 

Systemic risk resulting from SIIs: features of the 
banking sector: similarity of business models, high 
common exposures, high interconnectedness, high 
concentration 

United 
Kingdom 

0% 

Five RFB sub-groups 
and one building 
society 

N/A 

The banks are no longer subject to an SyRB 
following the entry into force of CRD V 

Source: ESRB notifications. 

218   Handelsbanken, SEB, Swedbank. 

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Annex 5: Main features of the systemic risk buffer in the EU and UK 

152 

 
 
 
 
 
 
 
 
 
 
 
 
Annex 6: Phasing-in of O-SII buffer and SyRB 
requirements 

Chart A.6.1 

Phasing-in of O-SII buffer requirements 

Source: ESRB. 
Notes: The Czech Republic and Denmark apply an SyRB to their O-SIIs rather than an O-SII buffer. For Cyprus, the phasing-in 
period illustrated is for credit institutions identified as O-SIIs. If the buffer of only one bank was not fully phased-in, this is not 
reflected in the chart. Cyprus, Hungary, Greece and Portugal reviewed their phasing-in schedule in the light of COVID-19. 
Lithuania adjusted the phasing-in schedule for one institution 219, which will now only meet the highest requirement on 31 
December 2021, but all other institutions are already phased-in. 

219   AB Šiaulių bankas. 

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Annex 6: Phasing-in of O-SII buffer and SyRB requirements 

153 

 
 
 
 
Chart A.6.2 

Phasing-in of the SyRB in Europe 

2014

2015

2016

2017

2018

2019

2020

2021

AT
BE
BG
CY
CZ
DE
DK
EE
ES
FI
FR
GR
HR
HU
IE
IT
LT
LU
LV
MT
NL
PL
PT
RO
SE
SI
SK
UK
IS
LI
NO

Fully phased-in

With phasing-in period

Source: ESRB. 
Notes: In Romania, a 1% SyRB was applied in March 2016 to all banks with a parent bank based in a non-investment-grade 
country in order to avoid contagion risk resulting from ownership structure. The instrument was suspended in June 2016 and 
deactivated from March 2017 onwards. Slovakia initially had a phasing-in period spanning 2017 and 2018, but later revised the 
2018 levels to equal those of 2017. In Denmark, a general SyRB for the Faroe Islands will be phased in to a level of 3% in 2020 
(4.5% and 5% for the O-SIIs in the Faeroes depending on their systemic importance). If the buffer of only one bank was not fully 
phased-in, this is not reflected in the chart. In 2020, EE, FI, HU, NL, PL and the United Kingdom ceased to apply an SyRB to 
their institutions. 

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Annex 6: Phasing-in of O-SII buffer and SyRB requirements 

154 

 
 
Annex 7: Macroprudential authorities 

Table A.7.1 

EEA countries where the role of macroprudential authority and the role of designated 

authority are undertaken by different institutions 

EEA country 

Macroprudential authority 220 

Designated authority 221 

Austria 

Croatia 

Denmark 

Germany 

Italy 

Latvia 

Finanzmarktstabilitätsgremium  
(Financial Market Stability Board) 

Vijeće za financijsku stabilnost  
(Financial Stability Council) 

Finanzmarktaufsichtsbehörde 
(Financial Market Authority) 

Hrvatska narodna banka 

Det Systemiske Risikoråd  
(Systemic Risk Council) 

Erhvervsministeren (Ministry for Industry, 
Business and Financial Affairs) 

Ausschuss für Finanzstabilität  
(Financial Stability Committee) 

Bundesanstalt für Finanzdienstleistungsaufsicht  
(Financial Supervisory Authority) 

* 

Latvijas Banka 

Banca d’Italia 

Finanšu un kapitāla tirgus komisija  
(Financial and Capital Market Commission) 

Ministerium für Präsidiales und Finanzen 
(Ministry for General Government Affairs and 
Finance), and Finanzmarktaufsicht Liechtenstein 
(Financial Market Authority) 

Liechtenstein 

Ausschuss für Finanzmarktstabilität 
(Financial Stability Council) 

Luxembourg 

Comité du Risque Systémique  
(Systemic Risk Committee) 

Commission de Surveillance du Secteur Financier 
(Financial Supervisory Commission) 

Poland 

Komitet Stabilności Finansowej (Financial Stability 
Committee) 

Minister Finansów 
(Ministry of Finance) 

Netherlands 

Financieel Stabiliteitscomité  
(Financial Stability Committee) 

Slovenia 

Odbor za finančno stabilnost  
(Financial Stability Board) 

De Nederlandsche Bank 

Banka Slovenije 

Security Markets Agency (ATVP) 

Insurance Supervision Agency (AZN) 

Spain 

Autoridad Macroprudencial Consejo de Estabilidad 
Financiera (Macroprudential Authority Financial 
Stability Council) 

Banco de España 

Comisión Nacional del Mercado de Valores 
(National Securities Market Commission) 

Note: (*) In Italy, a legislative decree delegated the government to establish an Italian macroprudential policies board, but the 
delegated powers were exercised before the deadline. In Spain, the designated authority for credit institutions is the Banco de 
España whereas for investment firms it is the CNMV. 

220   Macroprudential authority established in accordance with Recommendation ESRB/2011/3. 
221   Designated authority established in accordance with Article 136 of CRD IV. 

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Annex 7: Macroprudential authorities 

155 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table A.7.2 

EEA countries where the role of macroprudential authority and the role of designated 

authority are undertaken by the same institution(s) 

EEA country 

Macroprudential authority 222/designated authority 223 

Belgium 

Bulgaria 

Cyprus 

Czech Republic 

Estonia 

Finland 

France 

Greece 

Hungary 

Iceland 

Ireland 

Lithuania 

Malta 

Norway 

Portugal 

Romania 

Slovakia 

Sweden 

United 
Kingdom 

Nationale Bank van België/Banque Nationale de Belgique 

Българска народна банка (Bulgarian National Bank) and 
Комисия за Финансов Надзор (Financial Supervision Commission) 

Κεντρική Τράπεζα της Κύπρου (Central Bank of Cyprus) 

Česká národní banka 

Eesti Pank 

Finanssivalvonta (Finnish Financial Supervisory Authority) 

Haut Conseil de Stabilité Financière (High Council for Financial Stability) 

Τράπεζα της Ελλάδος (Bank of Greece) 

Magyar Nemzeti Bank 224 

Seðlabanki Íslands (Central Bank of Iceland) 

Banc Ceannais na hÉireann/Central Bank of Ireland 

Lietuvos bankas 

Bank Ċentrali ta’ Malta/Central Bank of Malta 

Finansdepartementet (Ministry of Finance) 

Banco de Portugal 

Comitetul Național pentru Supravegherea Macroprudențială  
(National Committee for Macroprudential Oversight) 

Národná banka Slovenska 

Finansinspektionen (Financial Supervisory Authority) 

Bank of England - Financial Policy Committee 

222   Macroprudential authority established in accordance with Recommendation ESRB/2011/3. 
223   Designated authority established in accordance with Article 136 of CRD IV. 
224   The substructure of the Magyar Nemzeti Bank responsible for macroprudential policy is the Pénzügyi Stabilitási Tanács 

(Financial Stability Council). 

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Annex 7: Macroprudential authorities 

156 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Countries and abbreviations 

Countries

AT 

Austria 

BE 

Belgium 

BG 

Bulgaria 

CY 

Cyprus 

CZ 

Czech Republic 

DE 

Germany 

DK 

Denmark 

EE 

ES 

FI 

Estonia 

Spain 

Finland 

FR 

France 

GR 

Greece 

HR 

Croatia 

IE 

IT 

LT 

LU 

LV 

Ireland 

Italy 

Lithuania 

Luxembourg 

Latvia 

MT 

Malta 

IS 

LI 

Iceland 

Liechtenstein 

NO 

Norway 

BR 

Brazil 

CH 

Switzerland 

CN 

China 

NL 

Netherlands 

HK 

Hong Kong 

PL 

PT 

Poland 

Portugal 

RO 

Romania 

SE 

Sweden 

SI 

Slovenia 

SK 

Slovakia 

KY 

Cayman Islands 

MX  Mexico 

RU 

Russia 

SG 

Singapore 

TR 

Turkey 

US 

United States of America 

HU 

Hungary 

UK 

United Kingdom 

Other

AIF 

BBM 

BCBS 

BIS 

BLS 

BRRD 

CCoB 

CCP 

CCyB 

CEE 

CPMI 

CRD 

CRE 

CRR 

CSD 

DB 

DC 

alternative investment fund 

borrower-based measure 

Basel Committee on Banking 
Supervision 

Bank for International Settlements 

Banking Lending Survey 

Bank Recovery and Resolution 
Directive 

capital conservation buffer 

central counterparty 

countercyclical capital buffer 

central and eastern European 

Committee on Payments and Market 
Infrastructures 

Capital Requirements Directive 

commercial real estate 

Capital Requirements Regulation 

centralised securities depository 

defined benefit 

defined contribution 

DSTI 

DTI 

EA 

EBA 

ECA 

ECB 

EEA 

debt service-to-income 

debt-to-income 

euro area 

European Banking Authority 

European Court of Auditors 

European Central Bank 

European Economic Area 

EFTA 

European Free Trade Association  

EIOPA 

EMIR 

ESA 

ESG 

ESMA 

EU 

FFAR 

European Insurance and 
Occupational Pensions Authority 

European Market Infrastructure 
Regulation 

European Supervisory Authority 

environmental, social and 
governance 

European Securities and Markets 
Authority 

European Union 

foreign exchange funding adequacy 
ratio 

A Review of Macroprudential Policy in the EU in 2020 / July 2021 
Countries and abbreviations 

157 

 
SCR 

SII 

SMEs 

SRB 

SSM 

SyRB 

TLAC 

TLTRO 

Solvency Capital Requirement 

systemically important institution 

small and medium-sized enterprises 

Single Resolution Board 

Single Supervisory Mechanism 

systemic risk buffer 

total loss-absorbing capacity 

targeted longer-term refinancing 
operations 

TRIM 

Targeted Review of Internal Models 

UCITS 

undertakings for collective investment 
in transferable securities 

FMI 

financial market infrastructure 

FRANDT 

fair, reasonable, non-discriminatory 
and transparent 

GAAP 

GDP 

G-SII 

IFR 

IORP 

IOSCO 

IRB 

LCR 

LGD 

LTG 

LTI 

LTV 

MFAR 

MFI 

MiFID 

MREL 

NCA 

NFC 

NGFS 

NPL 

NSFR 

OECD 

OFI 

O-SII 

PAYG 

PD 

PFMI 

PSA 

RRE 

RW 

SA 

generally accepted accounting 
principles 

gross domestic product 

global systemically important 
institution 

interbank funding ratio 

institution for occupational retirement 
provision 

International Organization of 
Securities Commissions 

internal ratings-based 

liquidity coverage ratio 

loss given default 

long-term guarantee 

loan-to-income 

loan-to-value 

mortgage funding adequacy ratio 

monetary financial institutions 

Markets in Financial Instruments 
Directive 

minimum requirements for own funds 
and eligible liabilities 

national competent authority 

non-financial corporation 

Network for Greening the Financial 
System 

non-performing loan 

net stable funding ratio 

Organisation for Economic Co-
operation and Development 

other financial institution 

other systemically important 
institution 

pay-as-you-go 

probability of default 

Principles for financial market 
infrastructures 

pension scheme arrangement 

residential real estate 

risk weight 

standardised approach 

A Review of Macroprudential Policy in the EU in 2020 / July 2021 
Countries and abbreviations 

158 

 
 
Imprint and acknowledgements 

Agne Dirmeikiene 

Stéphanie Stolz 

Editors 

Authors 

Assistant editors 

Ana Glória 

Nathan Huber 

Ilias Aarab 

Barbara Jeanne Attinger 

Ludivine Berret 

Enrico Calabresi 

Edoardo Colombari 

Jarn Denijs 

Alessandro Di Spirito 

Zsofia Döme 

Michal Dvořák 

Constanze Fay 

Christoph Fricke 

Ana Glória 

Camille Graciani 

Jakub Gruszczynski 

Kristian Horn 

Language editors 

Jonathan Drake 

Nathan Huber 

Giuseppe Insalaco 

Frederik Ledoux 

Alexandra Morão 

Aurelio Nocera 

Tuomas Peltonen 

Federico Pistelli 

Antonio Sanchez 

Eric Schaanning 

Eiko Sievert 

Frauke Skudelny 

Stéphanie Stolz 

Olaf Weeken  

Mieke Wennekes 

Andreas Westphal 

© European Systemic Risk Board, 2021 

Postal address 
Telephone 
Website 

60640 Frankfurt am Main, Germany 
+49 69 1344 0 
www.esrb.europa.eu 

All rights reserved. Reproduction for educational and non-commercial purposes is permitted provided that the 
source is acknowledged. 

The cut-off date for the data included in this report was 31 December 2020. 

For specific terminology please refer to the ESRB glossary (available in English only). 

PDF 

ISBN 978-92-899-4796-1, doi:10.2866/77568, QB-02-21-874-EN-N